The Home Buyers' Plan is one of the oldest tools in the Canadian first-time buyer kit: pull money out of your RRSP, tax-free, and put it toward your down payment. Since 2024 the limit has been a substantial $60,000 per person, which means a qualifying couple can move up to $120,000 of RRSP savings into a home purchase without triggering a cent of tax.
Used well, it is genuinely powerful. But unlike the FHSA I covered recently, the HBP comes with strings, and the strings are exactly where I see people get surprised, sometimes years after the purchase. So this post is about what can happen, both the good version and the other one.
How it works
If you are a first-time buyer, meaning broadly that neither you nor your spouse has occupied a home you owned in the last few years, you can withdraw up to $60,000 from your RRSP for a qualifying home you intend to live in. No withholding tax, no income inclusion. The withdrawal is processed through a simple CRA form with your bank.
The catch is in one word: withdrawal is really the wrong term. It is a loan from your own retirement savings, and the lender expects it back.
String one: the repayment schedule
You must repay the money to your RRSP over up to 15 years, starting the second year after you withdraw. On a full $60,000, that is $4,000 every year, on top of your new mortgage, property taxes, and everything else that comes with the home.
Here is what can happen, and what I want you to see coming. Miss a year's repayment, or repay less than the minimum, and the shortfall gets added to your taxable income for that year. You pay tax on it at your full marginal rate, and that chunk of RRSP room is gone forever. The CRA does not chase you; the system just quietly taxes you.
New homeowners are, almost by definition, at the most cash-strapped point of their adult lives. A repayment obligation that felt trivial when you signed the withdrawal form can feel very different in year three, after a roof repair and a parental leave. Plenty of people rationally choose to skip repayments and eat the tax. The point is to make that choice on purpose, in your budget, before you withdraw, not discover it as a surprise on a tax return.
String two: the 90-day rule
Money must sit in your RRSP for at least 90 days before an HBP withdrawal, or the deduction for that contribution can be denied. This matters because of a popular and legitimate manoeuvre: contribute your existing down payment savings to your RRSP, collect the tax deduction and the refund, then withdraw it all under the HBP. It works, and the refund is real money for your purchase. But it needs three months of runway. If you have already started house hunting, count backward from your likely closing before trying it, and get advice on your specific timing.
String three: the opportunity cost
Money withdrawn from your RRSP stops compounding for your retirement until it is repaid. Over a 15-year repayment schedule, that is a real cost, invisible on any statement. I am not saying it outweighs getting into a home sooner. In many markets and many lives it clearly does not. But it belongs in the ledger when you decide how much to pull.
Where the HBP fits now
Since the FHSA arrived, the order of operations for most first-time buyers has become clear. FHSA first: deduction going in, tax-free coming out, nothing to repay. HBP second, for RRSP savings you have already built up and want to put to work. And they stack: both can fund the same purchase, which for a couple with years of savings can assemble a very serious down payment entirely from tax-advantaged accounts.
A bigger down payment does more than shrink the mortgage. It can move you into better lending terms and, at certain thresholds, out of mortgage insurance premiums entirely, and it leaves breathing room for the closing costs that catch buyers off guard.
The takeaway
The Home Buyers' Plan is a good tool with a memory. It gives you up to $60,000 today and expects fifteen years of discipline in return, with a tax bill quietly waiting behind any year you fall short. Go in with the repayment built into your budget and the 90-day rule built into your timeline, and it is one of the most useful levers a first-time buyer has, especially layered on an FHSA.
If you are working out how to assemble a down payment for a purchase in Burlington or Hamilton, the full picture is in my first-time buyer guide, and I am always glad to talk through the sequencing for your situation. For the tax specifics, loop in an accountant before you pull the trigger, ideally with those 90 days to spare.