Home Buyers’ Plan (HBP): What it is and how it works

The Home Buyers’ Plan (HBP) is a Canadian program that lets eligible individuals withdraw money from their Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home. Withdrawals under the HBP are treated as a tax‑free loan provided the funds are repaid to the RRSP according to the program’s rules.

RRSP — quick reminder

An RRSP is a tax-advantaged retirement account in Canada: contributions are made pre‑tax, investments grow tax‑deferred, and withdrawals are taxed as income unless an exemption (like the HBP) applies.

Key features of the HBP

• Maximum withdrawal: CAD $35,000 per eligible person.
• Withdrawal timing: All HBP withdrawals must be made within a single calendar year and no later than 30 days after you begin living in the qualifying home.
• Repayment term: You have a total of 17 years to fully replace the withdrawn amount into your RRSPs — effectively a two‑year initial grace period followed by 15 years of required annual repayments. Annual required repayments that are not made are added to your taxable income for that year.
• Use of funds: Withdrawn funds must be used to buy or build a qualifying home for yourself. You may repay more than the minimum in any year.

Who qualifies

• First‑time homebuyers: Defined as people who have not owned and occupied a home during the four‑year period beginning on January 1 of the fourth year before the withdrawal. (Example: for a June 2021 withdrawal, the relevant ownership/occupancy period begins Jan. 1, 2017.)
• Exceptions: Individuals with a disability, or those helping a related person with a disability, may also qualify.
• Couples: Spouses or common‑law partners may each qualify individually as long as they meet the first‑time ownership test for themselves.

How to use the HBP (basic steps)

1. Confirm eligibility (first‑time buyer rules or disability exception).
2. Ensure eligible funds are in your RRSP and plan withdrawals within the same calendar year.
3. Withdraw up to CAD $35,000 (per eligible person) and move into the qualifying home; withdrawals must be completed by the deadline noted above.
4. Begin repaying per the HBP schedule — make at least the annual minimum repayment each year after the grace period. If you miss a required repayment, that year’s shortfall is included in your taxable income.

Comparison: similar U.S. provision

The U.S. offers a different relief for first‑time homebuyers: under the Taxpayer Relief Act of 1997, up to $10,000 can be withdrawn from an IRA for a first home. For traditional IRAs the withdrawal is generally taxable (though the 10% early‑withdrawal penalty is waived); for Roth IRAs, contributions (not earnings) can typically be withdrawn tax‑free. This differs from the HBP’s tax‑free loan structure when repayments are made as required.

Related program

The Lifelong Learning Plan (LLP) allows tax‑free RRSP withdrawals for education or training for the individual or a spouse/common‑law partner, but not for children.

Quick takeaways

• HBP lets eligible Canadians tap up to CAD $35,000 from RRSPs tax‑free to buy or build a qualifying home.
• You must meet the first‑time homebuyer (or disability) criteria and follow strict withdrawal and repayment rules.
• There is a two‑year grace period after withdrawal, then 15 years of required annual repayments; unpaid required amounts are taxed.