Home Buyers' Plan (HBP)

The Home Buyers’ Plan (HBP) lets first-time home buyers withdraw up to $60,000 from their RRSP to put toward buying a home. The withdrawal is tax-free, but it’s technically a loan to yourself. You have to pay it back into your RRSP over 15 years, starting the second year after your withdrawal.

If you’re buying with a partner and you’re both first-time buyers, each of you can withdraw up to $60,000 from your own RRSPs, giving you up to $120,000 combined.

Why it matters

The HBP can be a meaningful boost to your down payment, especially in expensive Canadian housing markets. But there are a few things worth knowing before you use it.

First, the money you withdraw stops growing inside your RRSP. If you pull out $60,000 that was invested in the market, you lose years of potential tax-sheltered growth on that amount. The repayment gets it back in eventually, but the lost growth in the meantime is a real cost.

Second, if you miss a repayment in any given year, that amount gets added to your taxable income. So instead of a penalty, the CRA just treats it as though you took the money out of your RRSP permanently for that portion.

Example

You withdraw $60,000 from your RRSP under the HBP. Your minimum annual repayment is $60,000 divided by 15 years, which is $4,000 per year. If you only repay $2,500 in a given year, the remaining $1,500 gets added to your taxable income for that year, and you’ll owe tax on it at your marginal rate.

The FHSA (First Home Savings Account) is a newer option that overlaps with the HBP in some ways. You can actually use both together. We cover how these programs compare and stack up in our guide to using registered accounts for a home purchase.