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Canada's Home Buyer's Plan

Kudos to the Government of Canada: Making Homeownership a Reality for First-Time Buyers with the Home Buyer's Plan.

What is Canada's Home Buyer's Plan?

The Canadian government offers the Home Buyer's Plan (HBP) to assist first-time homebuyers in purchasing a home.

Under this program, eligible individuals can withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to use towards buying a home.

However, it's important to understand the program's guidelines and restrictions.

Are you eligible for Home Buyer's Plan?

To qualify for the Home Buyer's Plan, you must:

• Be a first-time homebuyer who hasn't owned a home in the past four years.
• Have a written agreement to buy or build a qualifying home that will serve as your primary residence within one year of purchase or construction.

If purchasing a home with a partner, both parties can withdraw up to $35,000 from their RRSPs for a combined total of $70,000.

Withdrawal from RRSP:

To withdraw funds from your RRSP under the Home Buyer's Plan, you need to do following:

• complete Form T1036 and submit it to your RRSP issuer.
• The withdrawal must be made in a single calendar year.

Here's what you need to know about repaying the Home Buyer's Plan withdrawal:

• Repayment of the Home Buyer's Plan withdrawal begins in the second year after the withdrawal is made.
• You have up to 15 years to repay the funds into your RRSP.
• The repayment period is divided into 15 equal annual installments.
• The minimum payment required each year is 1/15 of the amount withdrawn.
• Failure to make the minimum payment in any given year will result in the amount being added to your income and taxed accordingly.

What are the limitations of The Home Buyer's Plan?

• The maximum withdrawal amount is $35,000, which may not cover the entire down payment on a home depending on its purchase price. You can also check First time home buyer incentive provided by Canada's government.
• Additionally, failing to repay the funds into your RRSP on time will result in taxes and penalties. Withdrawing funds from your RRSP under the Home Buyer's Plan limits the amount of savings you have for retirement.
  

Conclusion

the Home Buyer's Plan can be a helpful tool for first-time homebuyers in Canada. It allows them to use their own savings to make a down payment on a home without relying on other sources of financing. However, it's crucial to understand the program's rules and restrictions to avoid issues with taxes and penalties and to consider the long-term impact on your retirement savings. 

*Additional conditions may apply. The information is subject to change at any time. For more details please refer to Home buyer's plan for first time home buyers.