From RRSP Contributions to Homeownership

Hey there, hope you’ve had a chance to reflect on my last post about RRSPs. We went over how much to contribute, who they’re best for, and why they’re such a powerful tool for your financial goals. But RRSPs aren’t just about retirement savings, they can also help with one of life’s biggest milestones: buying your first home. If that’s a goal for you, there’s a program you should know about.

The Home Buyers’ Plan (HBP) can make homeownership a little more achievable, especially if you’ve been stashing money in your RRSP.

Here’s how it works:

• You can pull out up to $60,000 tax-free from your RRSP to buy or build your first home.

• Got a partner? They can do the same, giving you a combined $120,000 to work with.

• No need to stress about paying it back right away because you get 5 years of breathing room before repayments start, and then 15 years to repay it all.

It’s like borrowing from future-you to help present-you get a leg up in the housing market. Decent!

So how do you “repay” it?

Once you hit that 5-year grace period, you’ll need to start repaying what you borrowed. Your total withdrawal is split evenly over 15, with a portion due each tax year.

For example: If you withdrew $15,000, you’ll repay about $1,000 a year starting in the 6th tax year after your withdrawal. This is done by contributing to your RRSP as usual, but forgoing a portion of your deduction to have it count as “repayment” that year.

But here’s the important part, if you skip a repayment, the missed amount gets added to your taxable income for that year. Translation? A higher tax bill. To avoid that, set up automated contributions to your RRSP that cover the repayment amount and don’t forget to designate them as repayments! Or, just call me and I can take care of it.

So should we all use the HBP? As everything else, it depends!

Saving for a down payment in today’s market feels impossible. The HBP gives you a way to use your RRSP savings to take a serious bite out of that upfront cost. And if you pair it with a First Home Savings Account (FHSA), you can supercharge your down payment even more.

Just keep in mind that taking money out of your RRSP now means less growth for your retirement savings later. So, make sure you have a solid plan to balance repayments with your long-term goals.

The Bottom Line

The HBP isn’t a magic solution, but it’s a powerful tool that can make buying a home feel a little more achievable. If you’re curious about how to make it work for you, or how it fits with your other financial goals, let me know. I’m here to help make the numbers make sense.

P.S. Check out my last posts 🙂