What is Registered Retirement Savings Plan for First Time Buyer ?

The Canadian Government's Home Buyers Plan allows home buyers to borrow funds from their RRSP or registered retirement savings plan to buy or build a qualifying home. Under the home buyers plan, first time buyers can take $25,000 out of their registered retirement savings plan which is should be paid back over the next 15 years without incurring any penalty. In case of a couple buying a home, it means $50,000.

Registered Retirement Savings Plan

Why use Registered Retirement Savings Plan for Buying your First Home?

RRSP enables first time home buyer to utilize his existing sources for down payment. It may also enable buyer to accumulate 20% as down payment, so he don’t need to pay for mortgage default insurance premiums in future. One of significant advantages of using RRSP for buying home is that the withdrawal is not taxable as long as buyer pays it back within a 15-year period. Even if you have enough money for down payment it makes sense to take RRSP for buying home as your $25,000 RRSP contribution will count as a tax deduction in that particular year. One should use any tax refund that he receive to repay RRSP or other expenses

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Eligibility Conditions for Registered Retirement Savings Plan for Buying a Home

  • In order to be eligible for the plan, the RRSP funds being used by the buyer must be on deposit for at least 90 days prior to its withdrawal.
  • The buyer must be a Canadian resident and provide a signed agreement to buy a home or build a qualifying home.
  • The buyer should not have owned a home within the previous four years. In case, the buyer is buying home with a spouse or legal partner who is not a first time home buyer, must not have in a house they owned for 4 years
  • Buyer must intend to live in a home within one year of purchased.
  • Those who have earlier used the home buyer’s plan, they need to make sure that there are no pending dues of any previous plan.
  • And must make withdrawal from his RRSP within a month of getting title of home.


The payback amount is at least one-fifteenth a year of the amount the buyer withdrew from his RRSP. Home buyer using RRSP is required to repay the amount within fifteen years. The first payment is due after two years of first time withdrawal of the amount. You will get a notice of assessment from Canada revenue agency indicating the amount of loan repaid and balance should be paid. In order to repay the loan, they must make a contribution to your RRSP in the year of the repayment is due or in the first 60 days of following year. It is better to set up RSP-Matic®, an automatic monthly, bi-weekly or even weekly contribution to your RRSP, so that repayments are not missed.

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