If you are planning to buy your first home, RRSP Home Buyer Plan (HBP) may help you come up with extra funds for your mortgage down payment or house renovation.
It requires a while to get the habits and essay services manners of living down.
The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your RRSPs to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $25,000 in a calendar year.
RRSP withdrawal conditions under the HBP,
- You have not owned a home which you occupied as your principal residence during the past four years
- You have to be a resident of Canada at the time of the withdrawal.
- You have to receive all withdrawals in the same calendar year.
- You cannot withdraw more than $25,000. If you buy the home with your spouse, common-law partner, or other individuals, each of you can withdraw up to $25,000.
- Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or the contributions may not be deductible for any year.
- The house you buy must be located in Canada.
- You plan to use the home as a principal residence (not for rental income).
If you make a RRSP Home Buyer Plan withdrawal and a condition is not met, your RRSP withdrawal(s) may not be considered eligible. You will have to include the withdrawal(s) as income on your income tax return for the year you received the funds. You probably have to pay tax on the withdrawal.
You have to repay your HBP withdrawals.
You have up to 15 years to repay to your RRSPs the amounts you withdraw from your RRSPs under the HBP. However, you can repay the full amount into your RRSPs at any time. On your notice of assessment, you can see the required repayment amount. If you do not repay it, you have to include it as RRSP income.
Your repayment period starts the second year following the year you made your withdrawals.
To make a repayment under the HBP, you have to make contributions to your RRSP. While you are preparing your income tax, you can designate all or part of the contribution as a repayment under the HBP.
For instance, if you borrowed $15,000 under the HBP from your RRSP in 2012, the first minimum required repayment is $1,000 (1/15 of $15,000), which will be due in 2014. If you don’t contribute to RRSP to repaid it, you must included this $1,000 as income on line 129 (RRSP income) of your 2014 tax return.