Conditions for participating in the HBP

Only the individual who is entitled to receive payments from the RRSP (the annuitant) can withdraw funds from an RRSP. You can make withdrawals from more than one RRSP as long as you are the annuitant (plan owner) of each RRSP. Your RRSP issuer will not withhold tax on these amounts.

Generally, you will not be allowed to withdraw funds from a locked-in RRSP.

To participate in the HBP, ONE of the following conditions must apply:

·      You are withdrawing funds to buy or build a home for yourself as a first-time home buyer. more details...

or

·      You are withdrawing funds to buy or build a home for a related person with a disability . more details...

In addition, ALL of the following conditions must apply:

·      You must enter into a written agreement (Offer of purchase) to buy or build a qualifying home. The agreement may be with a builder or contractor, or with a realtor or private seller. Obtaining a pre-approved mortgage does not satisfy this condition.

·      You intend to occupy the qualifying home as your principal place of residence. more details...

·      Your repayable HBP balance on January 1 of the year of the withdrawal is zero. more details...

·      Neither you nor your spouse or common-law partner owns the qualifying home more than 30 days before the withdrawal. more details...

·      You are a resident of Canada. more details...

·      You buy or build the qualifying home before October 1 of the year after the year of withdrawal. more details...

You are responsible for making sure that all HBP conditions that apply to your situation are met.

If a condition is not met while you are participating in the plan, your RRSP withdrawal will not be considered eligible. You will have to include the RRSP withdrawal as income on your income tax return for the year you received the funds.

If you do not meet the conditions to participate in the HBP in the current year, you may be able to participate at a later date.

You have to enter into a written agreement to buy or build a qualifying home

To withdraw funds from your RRSPs under the HBP, when you are buying or building a qualifying home for yourself or a related person with a disability, you must first have entered into a written agreement to buy or build a qualifying home. Obtaining a pre-approved mortgage does not satisfy this condition.

Note
If you are withdrawing funds from your RRSPs to help a related person with a disability who is buying or building a qualifying home, it is the related person with a disability who must have entered into such an agreement.

You have to intend to occupy the qualifying home as your principal place of residence

When you withdraw funds under the HBP, you have to intend to occupy the qualifying home as your principal place of residence no later than one year after buying or building it. Once you occupy the home, there is no minimum period of time in which you have to live there.

In some cases, you may not occupy the qualifying home by the end of the 12-month period after you bought or built it. If this happens to you, we still consider you a participant in the HBP because you intended to occupy the home as your principal place of residence no later than one year after buying or building it.

Note
If you are withdrawing funds from your RRSPs to buy or build a qualifying home for a related person with a disability or to help a related person with a disability buy or build a qualifying home, you must intend that the related person with a disability will meet this condition.

You have to be considered a first-time home buyer

Generally, before you can withdraw funds from your RRSPs to buy or build a qualifying home, you have to meet the first-time home buyer's condition. If you are a person with a disability, or you are acquiring a home for a related person with a disability or helping such a person acquire a home, you may not have to meet this condition. Please refer to the section called "Exception to the first-time home buyer's condition".

You are not considered a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence.

If at the time of the withdrawal you have a spouse or common-law partner, it is possible that only one of you will be considered a first-time home buyer (see example 1).

Example 1
In 2004, Paul sold the home he had occupied as his principal place of residence for five years. He then moved into a rented apartment. In 2004, he met Jane and she moved in with him. Jane had been renting her own apartment, and had never owned a home.

Jane and Paul were married in August 2007. They wanted to withdraw funds from their RRSPs to participate in the HBP in September 2007. Since Paul owned and occupied his home during the period beginning January 1 of the fourth year before the year he wants to make the withdrawal, he is not considered a first-time home buyer, so he cannot participate in the HBP in 2007. Paul will be able to participate in the HBP in 2009, as he will not have owned a home that he occupied as his principal place of residence since January 1, 2005.

However, Jane is considered a first-time home buyer, since she never owned a home, and she did not live with Paul during the period in which he owned and occupied his home as his principal place of residence. She can participate in the HBP in 2007, providing all the other requirements are met.

If Jane does not participate in the HBP in either 2007 or 2008, Paul can participate in the HBP in 2009. If they want to participate together in the HBP, they both have to wait until 2009 at which time they can withdraw funds under the HBP to buy or build a qualifying home.

Exception to the first-time home buyer's condition - You do not have to meet this condition to participate in the HBP if any of the following situations apply to you at the time you make a withdrawal from your RRSPs under HBP:

·      you are a person with a disability and you withdraw funds from your RRSPs under the HBP to acquire a home that is more accessible, or better suited to your needs;

·      you withdraw funds from your RRSPs under the HBP to acquire a home for a person with a disability related to you by blood, marriage, common-law partnership or adoption, and the home is more accessible or better suited to the needs of that person; or

·      you withdraw funds from your RRSPs under the HBP and give those funds to a person with a disability related to you by blood, marriage, common-law partnership or adoption, to acquire a home that is more accessible, or better suited to the needs of that person.

Your repayable HBP balance on January 1 of the year of the withdrawal has to be zero

If you have previously participated in the HBP, you may be able to do so again if:

·      your HBP balance is zero on January 1 of the year during which you plan on making another HBP withdrawal; and

·      you meet all the other HBP conditions that apply to your situation.

Your HBP balance is zero when the total of your designated HBP repayments and the amounts included in your income (because they were not repaid to your RRSPs) in previous years equals the total eligible withdrawals you received.

Note
The RRSP contributions you make in the first 60 days of a year, and designate as HBP repayments for the previous year reduce your HBP balance for purposes of determining whether your balance is zero on January 1 of the current year. See "Chapter 2 - Repaying your withdrawals" for more information about designating HBP repayments.

Neither you nor your spouse or common-law partner can own the qualifying home more than 30 days before the withdrawal

You cannot withdraw an amount from your RRSP under the HBP if you or your spouse or common-law partner owned the home described on Form T1036, Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP, more than 30 days before the date of your withdrawal.

Note
If you are withdrawing funds from your RRSPs to help a related person with a disability to buy or build a qualifying home, the person with a disability and his or her spouse or common-law partner (if applicable) must meet this condition.

You have to be a resident of Canada

You have to be a resident of Canada when you receive funds from your RRSPs under the HBP and up to the time a qualifying home is bought or built. For more information about residency status, contact General Enquiries at               1-800-959-8281       .

If you become a non-resident after you receive your funds but before a qualifying home is bought or built, you may cancel your participation in the HBP. For more information, see the section called "Cancelling your participation".

If you become a non-resident after a qualifying home is bought or built, your withdrawal will be considered to be eligible. However, special rules will apply to the repayment of your HBP balance. For more information, see the section called "If you become a non-resident".

You have to complete Form T1036 for each eligible withdrawal

To make an eligible withdrawal under the HBP, you have to use Form T1036, Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP.

You have to complete this form for each withdrawal you make. You can download and print a copy of the form. You can also order a printed copy of the form by calling               1-800-959-2221       .

For more information about completing this form, see the section called "How to make an HBP withdrawal?".

You have to receive all withdrawals in the same calendar year

To participate in the HBP, you have to receive all the withdrawals from your RRSPs in the same calendar year. However, if you receive a withdrawal in one year and another in January of the following year, we consider the January withdrawal to have been received in the year the first withdrawal was made.

Note
If the January withdrawal is received before you acquire your qualifying home, or no later than 30 days after you acquire it, and all the other relevant conditions described in the chart are met, it is an eligible withdrawal. For this purpose, your HBP balance on January 1 is not a relevant condition and does not have to be zero.

You cannot withdraw more than $20,000

You can make more than one withdrawal, as long as the total of your withdrawals is not more than $20,000. If you buy the qualifying home with your spouse or common-law partner, or with other individuals, each of you can withdraw up to $20,000.

Note
If the total of your RRSP withdrawals under the HBP is more than $20,000, you will have to include the excess amount in your income for the year you received it. In addition, your RRSP issuer will have to withhold tax on the excess amount at the time of the withdrawal.

You have to buy or build the qualifying home before October 1 of the year after the year of the withdrawal

Generally, if you participate in the HBP in a particular year, you have to buy or build the qualifying home before October 1 of the year following the year of the withdrawal.

We consider you to have bought or built a qualifying home if you bought or built it alone or with one or more individuals. If you are building a qualifying home, we consider you to have built the home on the date it becomes habitable.

Note
If you are withdrawing funds from your RRSPs to help a related person with a disability to buy or build a qualifying home, the person with a disability must meet this condition.

If you do not buy or build the qualifying home before October 1 of the year after the year of the withdrawal, you can:

·      cancel your participation in the HBP (for more information, see the section called "Cancelling your participation" ); or

·      buy or build a different home, called a replacement property, before October 1 of the year following the year of the withdrawal.

A replacement property has to meet the same conditions as a qualifying home. You do not have to complete another Form T1036 to advise us that you are buying or building a replacement property. Just send a letter to:

Pension and RRSP Processing Group
Ottawa Technology Centre
875 Heron Road
Ottawa ON  K1A 1A2

Give your name, address, and social insurance number, as well as the address (and phone number, if possible) of the replacement property. Also, you have to state in the letter that you intend to occupy the replacement property as your principal place of residence no later than one year after you buy or build it.

Note
If you have already withdrawn from your RRSPs the $20,000 maximum allowed under the HBP, you cannot make any more withdrawals to buy or build the replacement property.

Extensions for buying or building a qualifying home or replacement property - If you do not buy or build the qualifying home you indicated on Form T1036 (or a replacement property) before October 1 of the year following the year of the withdrawal, we still consider you to have met the deadline if either of the following situations applies to you:

·      You had a written agreement, in effect on October 1 of the year following the year of the withdrawal, to buy a qualifying home or replacement property, and you buy the property before October 1 of the second year following the year of the withdrawal. In addition, you have to be a Canadian resident up to the time of purchase (see Example 4).

·      The year following the year of the withdrawal, you paid an amount before October 1 to the contractors or suppliers (with whom you deal at arm's length) for materials for the home being built, or towards its construction, that was at least equal to the total of your withdrawals under the HBP (see Example 5).

Example 4
On February 10, 2005, Steven, a Canadian resident, entered into an agreement to buy a duplex, the ground floor of which he intends to occupy as his principal place of residence. Because of an existing lease, the possession date is May 4, 2007. On February 20, 2005, Steven withdrew $15,000 from his RRSPs under the HBP. On May 4, 2007, he takes possession of the duplex and moves in.

Since Steven withdrew his funds in 2005, he had to buy the home before October 1, 2006. Although Steven took possession of the home after this deadline, we consider him to have bought the home by the deadline because he had an agreement in effect on October 1, 2006, he bought the home before October 1, 2007, and he was a Canadian resident when he bought it.

Example 5
In January 2006, Clara withdrew $10,000 from her RRSPs under the HBP. Earlier in the same month, she had finalized a contract to have her home built, and had paid $2,000 to the contractor. She paid $5,000 when construction started in April 2006, and $6,000 more in August 2007, for a total of $13,000. Clara dealt at arm's length with the contractor.

Construction of the home is not completed until December 15, 2007, because the building materials arrived late. Since Clara withdrew her funds in 2006, she has to have the home built before October 1, 2007. Although construction of the home is not completed until December 15, 2007, we consider Clara's home to have been built by the deadline because the $13,000 she paid towards its construction before this deadline is more than the total amount of her withdrawals ($10,000), and because she dealt at arm's length with the contractor.