Is It A Good Idea To Use RRSP to Buy A House?


Purchasing a new home is surely an enticing move but you’ll soon find yourself strangled with the down payment. Making the down payment turns out to be a hassle for a majority of property owners, as they need to shell out at least 20% of the property value. In these situations, it might be tempting for you to use RRSP for purchasing a new home. In this post, the experts at Paradise Developments have discussed whether or not it would be a good idea to do so. Alternatively, you can visit this site and directly consult the professionals.

You might know about the HBP (Home Buyers’ Plan), the federal plan that eases up the purchase experience for first-time homeowners. If you qualify, you can withdraw funds up to $25,000 from your RRSP accounts tax-free. Couples purchasing a property together can, therefore, pool together $50,000 for purchasing their new home. However, it is not easy to access retirement funds. You need to adhere to certain regulations to avail these benefits.

What Is The RRSP Home Buyers’ Plan?

The federal government has come up with the Home Buyers’ Plan, where you can channelize your RRSP savings for financing the down payment of your home. To qualify for this benefit, you need to deposit the RRSP funds for a minimum of 90 days in the account. Besides, the property owner needs to furnish a signed agreement for building or purchasing the qualifying property.

The prime advantage of this plan is that it’s not taxable, so long as you make the repayment within 15 years. The amount you pay back should be a minimum of 1/15th parts of the withdrawn amount from the RRSP. Therefore, property owners should make sure that they make timely repayments.

Advantages Of Using RRSP To Purchase Your Home

The RRSP Home Buyer’s Plan is a mechanism that can help you arrange funds for the 20% down payment you would have to make while purchasing your home. By deploying this strategy, you can draw a part of your existing resources and arrange funds for the down payment. Moreover, you need not pay the insurance premiums by default. Even if a property owner has adequate funds to make the down payment, it is logical to use the RRSP savings using the Home Buyers’ Plan.

The following instance will clarify the procedure further. Suppose, you have a savings of $25,000. You can obviously use this to make your down payment. It is assumed that your RRSP has enough room for contributing a similar amount. Before the closing date, you may move this savings to an RRSP, ensuring that you have at least 90 days in hand. Next, you need to withdraw this fund using the Home Buyers’ Plan.

As a direct advantage, you would have the contribution of $25,000 into the RRSP deducted from taxable income. You may also use any tax refund for repaying expenses, including the RRSP related to purchasing your home. However, make sure to pay the amount to your RRSP back in the next 15 years.

Things To Know If You Are Planning To Use RRSP For Purchasing A Home

Homeowners planning to use the HBP should consider certain aspects:

  • First-time property owners can capitalize on this opportunity. The actual rule states that you cannot have owned a property in the last four years. In case you are purchasing the property with a partner, you cannot have resided in the property owned by the partner.
  • You need to reside in the property for at least one year after making the new purchase.
  • Before you can withdraw the funds free from tax, you need to deposit the same in your RRSP account for at least 90 days.
  • You need to withdraw the funds within 30 days after you obtain ownership of the property.

Considerations To Make Before Proceeding

Before you finalize your decision to use RRSP for purchasing a new home, closely review all the perks and cons of the strategy. At the outset, consider these aspects regarding the decision.

  • Would you be able to repay the specified amount every year?
  • Would this be the best time for cashing out the retirement funds?
  • Consider the rate of return and investments on the current plan.
  • Whether you should reduce the amount of mortgage by forgoing the RRSP.

Preparing Yourself For Using RRSP

  • It makes sense to prepare yourself for using RRSP, as the norms of the scheme make it necessary for buyers to possess the property before the 1st of October of the years after the RRSP withdrawal. Take care to ensure that the property transaction gets notarized prior to this date. Failure to do so would get the amount taxed when you withdraw the same from your savings scheme. After all, this would be an expensive mistake to commit.
  • Particularly, if the project is under construction, you need to be careful about this aspect. Construction delays can get the entire process postponed.
  • Besides, you should prepare for the income tax refund that you can use as a part of your down payment. Usually, you would receive it within 4 to 6 weeks once you file the return.
  • In case you are willing to make the move during summer, make sure to transfer the funds in the RRSP before the date limit for the contribution. This would help you obtain the tax refund benefits in the upcoming summer.
  • Another crucial aspect to focus on is the loan that the bank would lend to you. At times, banks take longer to process loans. This might result in potential delays while purchasing.

Therefore, you should start looking for the property during the fall or summer. Seamless coordination among the different institutions you would be dealing with would put you in a formidable position to strategize the plan.


Although the strategy for using RRSP for purchasing a house is profitable, you need to take guard against delays. Again, once you obtain the funds, you need to make the minimum payment for fifteen years. At the same time, the current finances need to be prioritized.

Considering these challenges, it makes sense to consult and seek professional advice. Detailed guidance from the experts would help you manage the demands of the situation effectively.

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