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Updated 2mo ago.
Updated 2mo ago.
The HBP allows you to withdraw up to $60,000 from your RRSP tax-free to buy or build a qualifying first home. The withdrawn amount must be repaid to your RRSP over a maximum of 15 years, otherwise unpaid amounts are added to your taxable income. The program is available to first-time home buyers or those who have not owned a home in at least 4 years.
Marie has $35,000 in her RRSP invested in VGRO.TO. She wants to buy her first condo in Montreal. She withdraws $35,000 through the HBP without paying any tax. Combined with $8,000 from her FHSA, she has a down payment of $43,000. Starting in the second year after the withdrawal, she must repay at least 1/15 of the amount (about $2,333/year) back into her RRSP. If she misses a repayment, that amount is added to her taxable income for the year.
The HBP is a key tool for Canadian first-time home buyers who have RRSP savings. Combined with the FHSA (which also allows a tax-free withdrawal for a first home), it enables building a substantial tax-sheltered down payment. However, withdrawing from your RRSP means losing compound growth on those funds during the repayment period. You need to weigh the tax benefit against the opportunity cost.