The Home Buyers' Plan (HBP): Understanding eligibility and withdrawals

Key idea to understand

The HBP is intended for first-time home buyers and you need to meet all of the eligibility criteria to participate. You aren’t considered a first-time home buyer if you lived in a home that you owned at any time in the current calendar year or in the previous 4 calendar years.

Example

Sofia sold her home in 2022 and has been renting ever since. In 2025, she uses the HBP to withdraw $60,000 from her RRSP to buy a new home.

Sofia is not eligible to make an HBP withdrawal because at some point in the previous four years, she lived in a home that she owned.

Since she is not considered a first-time home buyer, the $60,000 will be treated as a regular RRSP withdrawal. This means:

• the $60,000 is added to Sofia’s taxable income for 2025, so she will have to pay tax on that amount
• this increase in income could put her in a higher income bracket, which means she could have to pay more tax
• if Sofia wants to put the $60,000 back into her RRSP, she needs to have enough contribution room to do so
• she might have to pay additional penalties and interest on her tax return if the error isn’t caught right away

What Sofia should have done

To use the HBP to buy a new home, Sofia should have waited until 2027 to make a withdrawal.

Key idea to understand

You are not considered a first-time home buyer if your current spouse or common-law partner owned the home that you lived in, even if you did not own the home yourself.

Example

Jaspreet has never owned a home but has lived with her common-law partner, Mark, for the last two years. Mark owns the condo that they live in. While Jaspreet knows that Mark is not eligible for the HBP, she withdraws $40,000 from her RRSP in 2025 to buy a house with Mark.

Jaspreet is not eligible to make an HBP withdrawal because she lived in a home owned by her common-law partner within the last four years.

She is not considered a first-time home buyer and the $40,000 will be treated as a regular RRSP withdrawal. This means:

• the $40,000 is added to Jaspreet’s taxable income for 2025, so she will have to pay tax on that amount
• this increase in income could put Jaspreet in a higher income bracket, which means she could have to pay more tax
• if she wants to put the $40,000 back into her RRSP, she needs to have enough contribution room to do so
• Jaspreet might have to pay additional penalties and interest on her tax return if the error isn’t caught right away

What Jaspreet should have done

Unfortunately, Jaspreet cannot use the HBP as she is not considered a first-time home buyer. She should not have made an HBP withdrawal.

Key idea to understand

You need to repay any outstanding balance from previous HBP withdrawals before making a new withdrawal. This ensures you stay on track and avoid unexpected tax implications.

Example

Alex withdrew $25,000 from his RRSP under the HBP in 2015. Under the HBP, he needs put that amount back into his RRSP within 15 years.

By 2025, Alex has only repaid $15,000 to his RRSP. He then withdraws another $60,000 for a new home.

Alex is not eligible to make another HBP withdrawal because he still has a balance to repay from his first withdrawal. The new $60,000 withdrawal is treated as a regular RRSP withdrawal. This means:

• the $60,000 is added to Alex’s taxable income for 2025, so he will have to pay tax on that amount
• this increase in income could put him in a higher income bracket, which means he could have to pay more tax
• if Alex wants to put the $60,000 back into his RRSP, he needs to have enough contribution room to do so
• he might have to pay additional penalties and interest on his tax return if the error isn’t fixed right away

What Alex should have done

To use the HBP to buy a new home in 2025, Alex should have repaid his existing participation by December 31, 2024. He would have had to contribute an additional $10,000 to his RRSP in 2024 or in the first 60 days of 2025, and designated that amount as an HBP repayment on his 2024 income tax return.

Key idea to understand

You can only cancel a withdrawal from your RRSP under the HBP if one of the following situations apply:

• you did not buy or build a qualifying home or replacement property
• you became a non-residen before buying, or building, a qualifying home or a replacement property

Example

Lina withdrew $35,000 under the HBP in 2022 to buy a condo that was under construction. A year later, due to construction delays, she believes she needs to cancel her RRSP withdrawal as it is taking too long for her to take possession of the condo. But, Lina still plans on taking possession as soon as the condo is ready for her to move in.

She returns the money to her RRSP and submits an RC471 Home Buyers' Plan (HBP) – Cancellation to the CRA. In 2024, once her condo is ready, Lina withdraws $60,000 under the HBP.

Because her condo is still under construction, and she is still planning to take possession, Lina cannot cancel her original participation in the HBP. Her first withdrawal is still considered eligible. When she returned the $35,000 to her RRSP in 2023, it was treated as a new RRSP contribution. Also, the new $60,000 withdrawal is treated as a regular RRSP withdrawal. This means:

• the $35,000 was treated as a new RRSP contribution, which could lead to over-contribution taxes if she doesn’t have enough contribution room
• the $60,000 is added to her taxable income for 2024, so she will have to pay tax on that amount
• this increase in income could put Lina in a higher income bracket, which means she could have to pay more tax
• if she wants to put the $60,000 back into her RRSP, she needs to have enough contribution room to do so
• Lina might have to pay additional penalties and interest on her tax return if the error isn’t fixed right away

What Lina should have done

Lina should have contacted the CRA before trying to repay her first withdrawal into her RRSP.

Key idea to understand

False statements can have serious consequences. Being truthful when completing the Form T1036 will ensure that each of the withdrawals you make using the T1036 are eligible and avoid future penalties.

Example

Myriam and her husband, Guy, are looking for a new investment opportunity. They find a property they think would be perfect to generate rental income. They each withdraw $60,000 under the HBP in 2025 to purchase the property, even though it will not be their principal residence, which is one of the eligibility requirements. They falsely claim on the T1036 Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP that they intend to live in the home as their principal place of residence.

Myriam and Guy are not eligible to participate in the HBP because the home they want to purchase will not be their principal residence. Because they are not eligible, each of their $60,000 withdrawals will be treated as a regular RRSP withdrawal. This means: 

• the $60,000 withdrawals are added to their respective taxable incomes for 2025, so they will have to pay tax on those amounts
• this increase in income could put them in a higher income bracket, which means they would have to pay more tax
• if they want to put the $60,000 back into their RRSPs, they need to have enough contribution room to do so
• they might have to pay additional penalties and interest on their tax returns if the error isn’t fixed right away

What Myriam and Guy should have done

Myriam and Guy should have completed their T1036 forms truthfully.

Final key idea

The HBP is a great tool, but mistakes can lead to unexpected taxes and penalties. Not sure where to start? Find the information you’re looking for on The Home Buyers' Plan or reach out to your financial institution.

Disclaimer

The “key ideas to understand” are specific to the examples provided. Other conditions might apply to your personal situation.