Saving for a down payment is often the biggest hurdle for home buyers in British Columbia. Whether you are looking at a condo in Vancouver or a family home in Abbotsford, the price tags can be intimidating.
One of the most common questions I get asked as a mortgage professional is: “Can I use my RRSP to buy a house?”
The answer is yes. Through Canada’s Home Buyers’ Plan (HBP), eligible home buyers can withdraw funds from their RRSP to help finance a qualifying home purchase.
But, like everything in the financial world, there are rules, limits, and strategies you need to know.
In this guide, we will break down how to use your RRSP to buy a home, the latest 2024/2025 rule changes, and why working with a professional like Asim Ali can help you maximize these benefits.
Can I use my RRSP to buy a house in Canada?
Yes. First-time home buyers in Canada can withdraw up to $60,000 tax-free from their RRSP through the Home Buyers’ Plan (HBP) to use toward a down payment. If two eligible buyers are purchasing together, they can withdraw up to $120,000 combined.
The withdrawn amount must be repaid to your RRSP over 15 years, with annual repayments beginning in the required repayment year based on when you made the withdrawal.
What is the Home Buyers’ Plan (HBP)?
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.
How Much Can You Withdraw? (New 2024 Update)
The Home Buyers’ Plan (HBP) allows first-time home buyers in Canada to withdraw up to $60,000 tax-free from their RRSP for a home purchase. This limit was increased from $35,000 to better reflect rising housing costs.
If you are buying a home with a spouse or common-law partner, both individuals can participate in the HBP, allowing a combined withdrawal of up to $120,000.
Using these funds can significantly reduce your required mortgage amount and help lower your monthly mortgage payments.
To see how a larger down payment changes your numbers, check out our mortgage calculator.
Who Qualifies as a First-Time Home Buyer?
To use your RRSP under the HBP, you must be a “first-time home buyer.” However, the definition is broader than you might think.
You are generally considered a first-time buyer if:
- You have not owned and occupied a home as your principal residence in the four-year period before the HBP withdrawal, subject to CRA rules and exceptions.
- In the four years before the withdrawal, you did not live in a home that you or your current spouse or common-law partner owned.
- You are a person with a disability or you are helping a related person with a disability buy or build a home.
This means even if you owned a home 10 years ago, you might qualify again! If you aren’t sure if you meet the criteria, contact us today for a quick review of your situation.
The 90-Day Rule: Don’t Make This Mistake!
One of the most important rules of the Home Buyers’ Plan (HBP) is that your RRSP funds must be in your account for at least 90 days before you can withdraw them tax-free.
If you contribute to your RRSP and withdraw the funds too soon, the withdrawal may not qualify under the HBP because the 90-day rule may apply. Instead, it will be treated as taxable income, and you will be required to pay income tax on the full amount.
To ensure your withdrawal remains tax-free, always plan your RRSP contributions at least 90 days before using the Home Buyers’ Plan.
Planning is key. This is why it is vital to speak with a broker early. Whether you are in Surrey or Nanaimo, we help you set a timeline so your money is ready when you are.
How Does Repayment Work?
The HBP is essentially an interest-free loan to yourself. Since it is a loan, you have to pay it back.
- The Grace Period: Repayment timing depends on when you made the withdrawal. For withdrawals made between 2022 and 2025, the start of repayments was temporarily deferred under CRA rules.
- The Timeline: You have 15 years to pay back the full amount.
- Annual Payments: Each year, you must pay back 1/15th of the total amount you borrowed.
If you fail to make a repayment in a specific year, that amount is added to your taxable income for that year. You don’t “lose” the money, but you do lose the tax advantage.
Pros and Cons of Using Your RRSP for a Down Payment
The Pros:
- Boost Your Down Payment: A larger down payment can help you avoid the need for CMHC insurance if you reach the 20% mark. Explore uninsured mortgage solutions for more details.
- Lower Interest Costs: The more money you put down, the less interest you pay over the life of your mortgage.
- Interest-Free Loan: There is no interest charged on the money you take from your RRSP.
The Cons:
- Lost Growth: While the money is out of your RRSP, it isn’t earning investment returns.
- Repayment Stress: You will have an “extra” bill to pay back into your RRSP every year on top of your mortgage and property taxes.
- Reduced Retirement Nest Egg: If you don’t manage your finances well, you might find yourself behind on retirement savings later in life.
RRSP vs. FHSA: Which Should You Use?
There is a new player in town: the First Home Savings Account (FHSA). This account combines the best of the RRSP and the TFSA.
- RRSP (HBP): Tax deduction when you put money in, but you must pay it back.
- FHSA: Tax deduction when you put money in, and you do not have to pay it back.
Most savvy buyers in BC are now using a combination of both. You can use your $60,000 HBP and your FHSA funds together. To figure out the best strategy for your specific income level, you should look at current rates and talk to a pro.
What if You Don’t Have Enough in Your RRSP?
If your RRSP is empty and you’re struggling to save, don’t lose hope. There are other ways to secure a home in British Columbia’s competitive market:
- Borrowed Down Payment: Yes, it is possible to borrow your down payment. Learn more about our borrow down payment services.
- B-Lenders: If the big banks say no because of your credit or income structure, B-Lender BC mortgages offer more flexibility.
- Private Lenders: For short-term solutions or unique properties, private lenders in BC can bridge the gap.
Why Work With Asim Ali?
Navigating the Home Buyers’ Plan is just one piece of the puzzle. You also need to find the best mortgage product for your long-term goals.
Asim Ali is a seasoned mortgage broker serving all of British Columbia, from Kelowna to Victoria and everywhere in between. Here is why clients choose us:
- Access to More Lenders: We don’t just work with one bank. We have access to AAA lenders, credit unions, and private financing.
- Specialized Knowledge: Whether you are self-employed or looking for construction financing, we know how to package your application so it gets approved.
- Local Expertise: We understand the nuances of different BC markets, whether it’s Kitsilano or Prince George.
The Step-By-Step Process to Using Your RRSP
- Check Your Balance: Log into your CRA My Account to see your RRSP contribution room and current balance.
- Get Pre-Approved: Before you go house hunting, know what you can afford. Apply now to get started.
- Find Your Home: Once you have an offer accepted, you will fill out Form T1036.
- Withdraw the Funds: Submit the form to your financial institution.
- Complete the Purchase: Use the funds for your down payment or closing costs.
Final Thoughts
Using your RRSP to buy a house is a powerful tool, but it requires a solid game plan. You need to balance the benefit of a larger down payment against the responsibility of 15 years of repayments.
Don’t navigate this alone. The rules around the First-Time Home Buyer Incentive and RRSP withdrawals change frequently.
Are you ready to stop renting and start owning?
Let’s look at your RRSP, your income, and your goals to find the perfect mortgage. Contact Asim Ali today. We’ve helped thousands of people across BC from Coquitlam to Kamloops achieve the dream of homeownership.
Contact Asim Ali Today or check out our testimonials to see how we’ve helped others just like you