In today’s competitive housing market, every financial advantage counts. For Canadians looking to buy their first home, the Home Buyers’ Plan (HBP) offers an excellent opportunity to tap into their RRSP (Registered Retirement Savings Plan) savings, making the dream of homeownership more accessible. Here’s how the HBP works and recent changes that make it even more beneficial.

What is the Home Buyers' Plan (HBP)?

The HBP allows eligible Canadians to withdraw up to $60,000 from their RRSPs, tax-free, to use toward the purchase or construction of a primary residence. If both you and your partner qualify, you can withdraw up to $120,000 collectively. This can significantly reduce your mortgage and help with other associated costs like down payments or closing expenses.

Recent 2024 Updates to the HBP

In response to Canada’s housing affordability crisis, the federal government’s 2024 budget tabled on April 16 introduced two key changes to the HBP:

1. Increased Withdrawal Limit: The maximum withdrawal has been raised from $35,000 to $60,000, allowing more flexibility. Couples can now combine up to $120,000 for their home purchase, providing much-needed financial relief, particularly for first-time buyers. 

2. Extended Repayment Grace Period: Previously, HBP repayments began in the second year following the withdrawal. The 2024 budget proposes extending this grace period to five years for withdrawals made between January 1, 2022, and December 31, 2025. This means if you make a withdrawal during this period, you’ll have more time to manage your finances before starting to repay the borrowed funds. The 15-year repayment timeline remains unchanged.

Repaying Your RRSP

The HBP requires you to repay the withdrawn amount to your RRSP over a 15-year period. With the recent changes, you now have a five-year grace period before repayments begin (for withdrawals between 2022 and 2025). Here’s an example:

If you withdraw $60,000 in 2024, you must begin repayments by 2029, making annual payments of $4,000 over 15 years.

Who Qualifies for the HBP? 

To be eligible, you must be a first-time homebuyer or have not owned a home within the last four years. You can also qualify if you’re purchasing a home for a disabled relative. The home must be located in Canada and serve as your primary residence within the first year of purchase.

Maximize Your Savings

The HBP is an effective way to lower your mortgage and interest costs without taking on additional debt. However, ensure that the funds you wish to withdraw have been in your RRSP for at least 90 days before withdrawal to avoid penalties. Keep in mind, you can also explore the First Home Savings Account (FHSA) for more tax-saving opportunities when buying your first home.

Final Thoughts

With these updates, the HBP is an even more valuable tool for Canadians looking to purchase their first home or rebuild after a relationship breakdown. Whether you're aiming to buy a single-family home, a unit in a high-rise, or a home for a disabled relative, the HBP can help make homeownership a reality. Stay informed and leverage these changes to make the most of your RRSP and get one step closer to owning your dream home!

For more information on the HBP or other homebuying incentives, feel free to reach out, and I’d be happy to help guide you through the process.