| Home Buyers Plan
The Home Buyers' Plan (HBP) allows a homebuyer to withdraw
up to $20,000 from his or her RRSP to buy or build a home.
The buyer's spouse or partner can also withdraw money, so
in total, a couple could have $40,000 for their downpayment.
The homebuyer does not have to pay tax or interest on the
money withdrawn.
There are a number of criteria that must be met to qualify
for this plan.
- The buyers must not have owned a home
that was occupied as a principal place of residence during
the period beginning January 1 of the fourth year before
the year of withdrawal and ending 31 days before the
withdrawal. For example, the buyers want to participate
in the HBP in 2001. They cannot have owned and occupied
as a principal place of residence a home at any time
during the period beginning January 1, 1997 and ending
31 days before the withdrawal in 2001.
- All withdrawals under the Home Buyers'
Plan must be made in the same year and can not total
more than $20,000. Also, the buyers can not make a withdrawal
after they have owned the house for 30 days.
- The loan must be paid back to the RRSP
over 15 years, starting the second year after the money
is withdrawn. There is a minimum amount that must be
repaid each year - roughly 1/15th of the amount.
- The buyer must be a resident of Canada
and the home must be the principal residence.
- The money must be in a RRSP for at least
90 days before it can be withdrawn if the buyer wants
to claim a deduction.
- The buyer must buy or have an agreement
to build a home by October 1 of the year following the
withdrawal.
In the 1998 Federal budget, changes were made to the Home
Buyers' Plan, allowing homebuyers to use the HBP to purchase
a more accessible home or a home for a dependent, disabled
relative. And starting in 1999, homebuyers who have
already used the plan but have fully repaid their RRSP may
be eligible to use the plan a second time. However,
even if the buyers have repaid their RRSP, they won't be
able to participate in the HBP for a second time if they
have owned a house in the preceding 5 years.
Starting in 2000, the amount to be included in a deceased
participant's income for the year of death is equal to the
participant's HBP balance before death less any amount designated
as an HBP repayment for the year of death. Also, HBP cancellation
payments can be made to any of the participant's RRSPs with
any issuer, or to a new RRSP.
Source: Canada Customs and Revenue Agency - Home
Buyers Plan
Updated: June 14, 2001
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