To qualify for the Home Buyers’ Plan you must fill out Canada Revenue Agency (CRA) form 1036 to affect the withdrawal. The money you borrow must be returned to your RRSP in annual installments over a 15-year period, starting the second year following the withdrawal. You have 60 days following the year-end to make your RRSP repayment. For example, if you withdrew funds under the Home Buyers’ Plan in 1999, you must commence repayments by March 1, 2002.

You must identify the home you intend to purchase at the time you withdraw your funds, however you are given until October 1st of the year following the withdrawal to complete the transaction of the home you designated or a substitute home. If for whatever reason, there is no home purchase by that time, the funds can be restored to the RRSP by December 31 of that year, without penalty, using Part IV of the CRA form T1036 to identify the repayment).

You can borrow from more than one RRSP, but not beyond the $20,000 limit.

The Home Buyers’ Plan was originally intended as an assistance for first-time home buyers only, but the government realized that enforcing that restriction over a lifetime would be difficult; therefore the plan is available to all individuals who qualify under the 5-year test of non-ownership. According to this rule, you cannot make a withdrawal under the Home Buyers’ Plan if you owned a home at any time in the period commencing January 1 of the fourth year preceding withdrawal of RRSP funds. (For example, January 1, 1995 for a 1999 withdrawal) and ending 31 days prior to the withdrawal. As well, you cannot use the Home Buyers’ Plan if your current spouse (including common-law) owned a home that was your principal place of residence during the marriage or common-law relationship within the same time period.

Prior to 1999, an individual could take advantage of the Home Buyers’ Plan program only once in their lifetime. However subsequent changes to the plan allow that once you have repaid all the funds withdrawn for a prior use you may use the plan again commencing with the year following the final repayment.

There is an exemption to the 5-year rule in the case of disabled persons. Where RRSP funds are withdrawn under the Home Buyer’s Plan after 1998, the rule prohibiting withdrawals by someone who has owned a home in the past five years will not apply to withdrawals by a disabled person or the relative of a disabled person where the purpose of the withdrawal is to enable the disabled person to live in a home which is more accessible by the person, on in which the person is more mobile or functional, or which is better suited to the personal care and needs of the person.

Individuals are allowed to use funds withdrawn from an RRSP under the Home Buyers’ Plan to purchase a home jointly with others. Most commonly, husband and wife can each withdraw up to $20,000 from their respective RRSPs for the purchase of a jointly owned home. This opportunity is available to common-law spouses and in fact any group of individual, related or not, so long as they enter into a collective home ownership.

Depending on the terms of your RRSP and the nature of the investments in it, there might be a risk of penalty in the withdrawal of funds. For example, there is often a penalty in cashing in GIC’s early and some mutual funds have a back-end load or a charge for redemption within a minimum hold period. You should understand what these costs are before you withdraw; if you have more than one RRSP you may withdraw funds from each or any up to the overall $20,000 limit for all withdrawals together, and the cost of withdrawal.

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