October 06, 2023

How To Use Your RRSP To Buy A House

By Sun Life Staff

Interested in buying your first house? The Home Buyers’ Plan (HBP) lets you use your RRSP, tax-free, to do so. But how does it work and what are the conditions? Find out what it's all about below.

The Home Buyers Plan (HBP) at a glance

To qualify for the HBP

You must be a first-time home buyer. That means in the 4-year period* before the home purchase, you didn’t:

  • live in a home you owned, or
  • live in a home your current spouse or common-law partner owned.

To be tax deductible, your RRSP contributions must be in your account for at least 90 days before you withdraw them for the HBP.

You must have an agreement in place to buy or build your new home before October 1st of the year after you made the withdrawal.

You intend to occupy the qualifying home as your principal place of residence. You must live in it within one year after buying or building it. 

You must be a resident of Canada when you withdraw funds from your RRSP(s) under the HBP, and up to the time you buy or build a qualifying home.

*The 4-year period means the four years before a home purchase. The period begins on January 1 of the fourth year before you withdraw funds from your RRSP. The period ends 31 days before the date you withdraw the funds. For example, consider if you withdrew the funds on July 31, 2022. Then the 4-year period is from January 1, 2018, to June 30, 2022.

HBP advantages

  • You can save money in an RRSP without giving up on the home ownership dream.
  • Maximum withdrawal: $35,000 per person. A married or common-law couple can withdraw up to $70,000.
  • To avoid an income inclusion, you have to pay a minimum of 1/15 of the withdrawal back into your RRSP each year.

Scenario 1

How can the HBP help with your down payment?

Frank and Laura want to buy a $450,000 condo in the summer of 2023.

  • They each have $15,000 in their RRSPs.
  • They need to come up with a minimum down payment of 5%, which is $22,500.
  • They decide to use the HBP for the down payment. They each withdraw $11,250 from their RRSPs.
  • They have until September 30, 2024, to close the condominium purchase.
  • Each of them will need to repay at least $750 to their RRSPs every year starting in 2025.

Down payments under 20% need a Canada Mortgage and Housing Corporation (CMHC) loan to insure them.

Scenario 2

What happens if you don’t close on the home you withdrew funds to buy?

Sophia made an HBP withdrawal in 2022 to buy a condo, but the deal fell through.

Sophia decided not to buy a different residence before October 1, 2023. That means she can cancel her HBP participation and put the funds back into her RRSP, without penalty. To do so, Sophia must put the money back by December 31 of the year after the year she received the funds. In her case, that’s December 31, 2023.

Scenario 3

What happens if you can’t buy or build a house in time?

Michael made an HBP withdrawal in 2022, but was unable to buy or build a house before October 1, 2023. He can still meet the deadline if either of the following applies:

  • He has a written agreement in effect on October 1, 2023, to buy a home before October 1, 2024, of the following year.
  • He paid an amount after the date of the first withdrawal and before October 1, 2023, for materials for the home being built or towards its construction, that was at least equal to the total of all withdrawals under the HBP.

Scenario 4

Does the HBP work for everyone who buys their first house?

Synden and Gianni plan to buy a $500,000 home. They already have $30,000 towards their down payment.

  • They are reluctant to withdraw $35,000 each from their RRSP and use it towards the 20% down payment and avoid having a CMHC-insured loan.
  • Withdrawing funds from their RRSP could reduce their RRSP income down the road.
  • For them, the HBP may not be the best solution.

Like other financial tools, use the HBP strategically to ensure it helps you achieve your financial goals.

Need help saving for a house or with your RRSP?

Do you need help saving to buy your first house? Or maybe you need to set up an RRSP? Whatever the case, a Sun Life advisor can: 

  • explain your options, 
  • answer your questions, and
  • help you build a plan that meets your needs and goals.

Most advisors now offer virtual services and provide consultations by phone or video chat.  Find an advisor today.

Mutual fund business is done with advisors through Sun Life Financial Investment Services (Canada) Inc. Advisors and their corporations conduct insurance business through Sun Life Financial Distributors (Canada) Inc.

Sign up for FREE personalized tips, tools and offers.

I understand I can unsubscribe at any time and acknowledge that this email address belongs to me. Learn more about privacy and how we collect data to provide you with more relevant content.

Tools & calculators

RRSP vs. Mortgage calculator

Putting money in your RRSP is a great way to save for retirement. But you may gain more in the long run by paying down your mortgage first.

Net worth calculator

Use this calculator to find out how your net worth – the difference between what you own (your assets) and  what you owe (your liabilities) compares to other Canadians.

Need financial advice?

Make well-informed decisions with helpful advice. Talk to your advisor or find one near you - there is no cost to talk to an advisor.

Get a quote

You can buy some of our insurance products online.