How One New Homeowner Used the Home Buyers' Plan
Written by Nicola Brown
Thursday, April 29th, 2021
Amanda Parker is an entrepreneur based in Toronto. Having founded, grown, led and eventually sold a software company, she's in high demand as a business leader in the tech industry.
She recently borrowed money from her RRSP to buy her first home under the Government of Canada's Home Buyers' Plan (HBP). Here's why she chose to do this and what her experience using the program was like.
You recently borrowed money from your RSP to buy a house under the HBP. Why did you choose to do this?
"The HBP allowed me to withdraw $35,000 from my RRSP for the purchase of my first home. I max out my RRSP* each year for tax purposes and saved for retirement. That money is only meant to be withdrawn until retirement with the exception of the HBP. I used the HBP as a tax-free, interest-free way to top up my down payment and not have to pull it from other after-tax sources or interest-bearing loans."
How did your application process go?
"I knew I'd be using the HBP to top up my down payment while searching for my home. After I had my offer accepted on a home and a few days before the closing date, I filled out the online form T1036 Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP from the CRA website.
Once I filled it out, I gave the form to the bank to file the request. The bank transferred the money from my RRSP to my chequing account the same day to be combined with my other funds for my down payment. The process was simple and quick.
One thing to note: the funds needed to be in my RRSP for at least 90 days to be eligible for withdrawal.
There were lots of stressful moments on this house purchase, but the HBP thankfully wasn't one of them."
What did you need to do at tax time?
"After my withdrawal, my financial institution issued me a T4RSP form, which confirmed how much I withdrew from my RRSP under the HBP. I used this for my taxes at tax time.
When I began to pay the money back in the second year after I withdrew the funds, I reported my repayments on Schedule 7 and submitted it with my Income Tax Return."
What's your plan for paying back the money you borrowed from your RSP?
"I have 15 years to repay the withdrawal amount, and repayment started in the second year after I took the funds. For example, I bought my house in July 2019 and I'll start my repayment this tax year.
There's a minimum payment I must make each year, but not a maximum. I plan to pay it back in equal installments over the next 15 years. Some people may want to pay it back earlier to get that money re-invested and earning interest again as soon as possible."
*Tangerine's registered retirement savings product is called an RSP