1. Canadian Banks
    2. / Mortgages / Home Buyers Plan

Home Buyers Plan
In Canada if you are a first time home buyer you can take advantage of the Home Buyer's Plan, which is managed by Revenue Canada. The Home Buyer's Plan program was introduced to help first time home buyers to fund their mortgage down payment. Under the program you can withdraw up to $25,000 CAD from your RRSP and use it toward purchase of your first home. If you are married both you and your spouse can withdraw up to $25,000 CAD from your respective RRSP accounts.

If you make a withdrawal from your RRSP and use it for a down payment on your first home, you will have to repay it back within the next fifteen years. The first year after the withdrawal you don't have to repay anything, but starting the second year you have to start repaying the loan. If you withdraw $15,000 Canadian dollars from your RRSP under the Home Buyer's Plan, then you will have to repay $1,000 ($15,000 / 15) each year. If you skip a payment one of the years, the skipped amount will be added on your personal tax return and you'll have to pay taxes on it.

There are several conditions that have to be met under the Home Buyer's Plan, in order to be able to use your RRSP to fund a home purchase down payment. You have to be a Canadian resident. The portion of the RRSP you intend to use toward purchase of home must be in your RRSP account for more than 90 days. You are considered to be a first time home buyer only if you and your spouse haven't owned and lived in a principal residence for at least four years before the date of the RRSP withdrawal. You are required to have a written contract for the home purchase and the home has to be used as your main residence. You are obligated to make all withdrawals under the Home Buyer's Plan within one and the same year (2007 for example). These are some of the requirements to be able to use the Home Buyer's Plan, and for complete details check the Revenue Canada's website.

Before making the decision to use your RRSP to fund your first home purchase, consider all advantages and disadvantages of doing that. For example you have to make sure that you will be able to repay the amount you took out of your RRSP in the next fifteen year. Another thing to consider is that your RRSP is not taxed, until you start drawing to fund your retirement, hence it can grow at much faster rate compared to personal investment you pay taxes on.