How to Use the RRSP Home Buyers' Plan to Buy Your First Home

The RRSP Home Buyers' Plan (HBP) has been around for decades, and it's still one of the most valuable tools for first-time buyers in Canada. If you've been contributing to your RRSP, you might already be sitting on part of your down payment without realizing it.

Here's how the program works, what the rules are, and how to use it strategically when buying your first home in Winnipeg or anywhere else in Manitoba.

What Is the Home Buyers' Plan?

The Home Buyers' Plan lets you withdraw money from your Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home, without paying tax on the withdrawal. It's essentially a tax-free loan from your own retirement savings.

As of 2024, you can withdraw up to $60,000 from your RRSP under the HBP. If you're buying with a partner who is also a first-time buyer, each of you can withdraw up to $60,000 from your own RRSPs, for a combined total of $120,000.

Full details are available on the Government of Canada Home Buyers' Plan page.

Who Qualifies for the HBP?

You can use the Home Buyers' Plan if you meet these conditions:

• You are a first-time home buyer, meaning you did not own a home you lived in as a principal residence in the withdrawal year or the four preceding calendar years
• You are a Canadian resident
• You have a written agreement to buy or build a qualifying home
• You intend to occupy the home as your principal residence within one year of buying or building it

Your spouse or common-law partner must also meet the first-time buyer definition. If your partner currently owns a home you live in, you won't qualify even if you personally have never owned property.

There is one exception worth noting. If you've used the HBP before, you can use it again as long as your previous HBP balance has been fully repaid by January 1 of the year you make the new withdrawal, and you meet the first-time buyer definition again.

How to Make the Withdrawal

The process is straightforward, but there are steps you need to follow in order:

Step 1: Make sure your RRSP contributions have been in the account for at least 90 days. This is a rule that catches people off guard. If you deposit money into your RRSP today, you can't withdraw it under the HBP for at least 90 days. Plan ahead.

Step 2: Fill out Form T1036. This is the Home Buyers' Plan Request to Withdraw Funds from an RRSP form. You submit it to your financial institution, not to the CRA.

Step 3: Your financial institution processes the withdrawal. They won't withhold tax on the amount, as long as you don't exceed the $60,000 limit and you've completed the form properly.

Step 4: You must buy or build the home before October 1 of the year after the withdrawal. So if you withdraw funds in 2026, you need to have purchased or begun building your home by October 1, 2027.

You can make multiple withdrawals in the same year or across two calendar years, as long as the total doesn't exceed $60,000 and you complete the purchase within the required timeframe.

The Repayment Rules

This is the part that matters most, and where the HBP differs significantly from the FHSA. The money you withdraw under the Home Buyers' Plan must be repaid to your RRSP.

Here's how the repayment works:

• You have 15 years to repay the full amount
• Repayments start the second year after the year you made the withdrawal. If you withdraw in 2026, your first repayment is due for the 2028 tax year.
• Each year, you must repay at least 1/15th of the total amount withdrawn
• Repayments are not tax-deductible. You're putting money back, not making new contributions.

For example, if you withdraw $60,000, your minimum annual repayment would be $4,000 per year for 15 years. You designate your regular RRSP contributions as HBP repayments on your tax return using Schedule 7.

What happens if you miss a repayment? The amount you were supposed to repay that year gets added to your taxable income. So if you owe $4,000 and repay $0, you'll have an extra $4,000 of taxable income that year. You don't get penalized beyond that, but it effectively turns that portion of the withdrawal into a taxable one.

You can always repay more than the minimum in any year to get ahead of the schedule.

Strategic Ways to Use the HBP in Manitoba

Start Contributing Early with the HBP in Mind

If you know you want to buy in the next few years, increasing your RRSP contributions now serves double duty. You get the tax deduction today, and you build up funds you can later withdraw tax-free under the HBP. Just remember the 90-day rule on new contributions.

Combine the HBP with the FHSA

This is the strategy I recommend most to first-time buyers. The First Home Savings Account (FHSA) lets you save up to $40,000 with no repayment required. Combined with the HBP's $60,000 limit, a single buyer could access up to $100,000 in tax-advantaged funds.

For a couple, the numbers get even better. Two buyers could theoretically access up to $200,000 between their combined FHSAs and HBPs. In the Manitoba market, where average home prices remain below the national average, that kind of purchasing power can make a massive difference.

Use the Tax Refund Strategically

When you contribute to your RRSP, you get a tax refund. A smart approach is to take that refund and apply it toward your down payment savings or closing costs. Some buyers even contribute to their RRSP, claim the deduction, use the refund to contribute to their FHSA, and then eventually withdraw from both for the purchase. It takes planning, but the math works out in your favour.

Factor Repayments Into Your Post-Purchase Budget

Before you withdraw the full $60,000, think about whether you can realistically repay $4,000 per year on top of your mortgage, property taxes, insurance, and other homeownership costs. If you're stretching your budget to buy, a smaller HBP withdrawal might be wiser so you're not facing taxable income penalties down the road when you can't make the repayments.

Common Mistakes to Avoid

Forgetting the 90-day rule. If you need the money for a closing date in March, you can't make a large RRSP contribution in January and withdraw it right away. Those funds need to sit for at least 90 days.

Not designating repayments properly. When you make RRSP contributions during your repayment period, you need to indicate on your tax return that you're designating them as HBP repayments. If you forget, the CRA will treat the shortfall as income.

Withdrawing too much. Just because you can take $60,000 doesn't mean you should. Consider your ability to repay and whether the extra amount actually changes your home purchase. If you have enough for a 10% down payment without maxing out the HBP, that might be sufficient.

Missing the purchase deadline. If you withdraw funds and don't buy or build a home before the October 1 deadline the following year, you'll need to either repay the full amount to your RRSP by December 31 of the following year or include it as income on your tax return.

How the HBP Works With Manitoba's Housing Market

In Winnipeg and the surrounding areas, the HBP goes further than it does in most major Canadian cities. A $60,000 HBP withdrawal on a $375,000 home represents a 16% down payment. That's enough to avoid CMHC mortgage insurance (which kicks in below 20%) or come very close to it.

Even for buyers looking in communities outside the city, like Selkirk, Stonewall, or the RM of Springfield, the HBP can cover a significant chunk of the purchase price. Homes in these areas often come with more space and lower price points, making the HBP even more impactful.

Don't forget to budget for closing costs on top of your down payment. In Manitoba, you'll need to account for land transfer tax, lawyer fees, a home inspection, and potential property tax adjustments. These typically run 1.5% to 3% of the purchase price.

Is the HBP Worth It?

For most first-time buyers, yes. The ability to access your own savings tax-free for a home purchase is hard to beat. The repayment obligation is manageable for most people, and the alternative of leaving the money in your RRSP while renting longer isn't always the better financial move.

That said, if you're close to retirement or your RRSP is your only significant savings, think carefully. Pulling money out of your retirement fund has a real long-term cost in terms of lost investment growth.

For younger buyers with time to rebuild their retirement savings, the HBP is almost always a good call. Pair it with the FHSA, plan your contributions carefully, and you'll be in a strong position when you find the right home.

If you're thinking about buying in Winnipeg or the surrounding areas and want to understand how these programs fit into your specific situation, check out our buyer resources or connect with a mortgage professional who can walk through the numbers with you.

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