What is Home Buyer’s Plan

By definition, the Home Buyer’s Plan refers to a special program allowing Canadian citizens to withdraw a certain amount of money from their RRSPs so as use them for the construction or purchase of a qualifying property for themselves or for related individuals with known disabilities.

Canada is a vast country, whose government has taken it as its all-time top priority to guarantee the well-being and social security of its citizens from the cradle to grave. In this respect, the Home Buyer’s Plan (HBP) is a good example of an efficient public housing policy, based on the principles of the welfare state, which were first established in England in the years after Second World War.

As of January 27, 2009 the sum that could be withdrawn by first-time home owners increased to $25,000 CAD. It should be noted that these eligible withdrawals are not subject to taxation, which means that the holder of the retirement savings plan does not have to write this sum in his annual tax return as income. In addition, all withdrawals made by the annuitant have to be repaid to the RRSP within a period of not more than fifteen years from the date they were made. In the legal texts regulating home buyer’s plans, it is stated that a qualifying home is any housing unit located on the territory of Canada, be it a single family home, an apartment, or a home that is still under construction. Even a person who has little or no experience with the real estate market in Canada would agree that twenty-five thousand dollars could hardly buy a good home, but the sum helps for a down-payment. At the same time, it could also help one finish the home that he or she has already started building. As to related persons with disability who could also benefit from HBP, he or she could be related to the sponsor by blood, marriage, adoption or common law partnership.

In order to participate in a home buyer’s plan, the annuitant of a registered retirement savings plan should meet a number of conditions:

He or she has to use the funds to build a qualifying home for himself or herself. If the annuitant is a person with a known disability, he or she may withdraw funds to buy or build a qualifying home for himself or herself. As an alternative option, the annuitant of an registered retirement savings plan could buy or build a qualifying home for a related person with disability or help such a person buy or build a home for him or herself. Persons who become non-residents of Canada after receiving funds but before building or purchasing a home may cancel their participation in the home buyer’s plan.

Keep in mind that while some of these conditions apply before you withdraw any funds from the RRSP, others have to be met as soon as you receive the funds or after that.