How does the RRSP Home Buyers Plan process work?

It is important to note that any funds you withdraw for the homebuyers' plan must be in your account for 90 days prior to your withdrawal.

In order to participate in the Home Buyers' Plan, you must print off a copy of Form T1036 . This form is available from Canada Revenue Agency's website (www.cra-arc.gc.ca). You must fill out Section 1 then give the form to the financial institution that holds your RRSP so they can fill out Section 2. Your financial institution will send you a T4RSP form, which will confirm how much you withdrew from your RRSP as a part of the Home Buyers' Plan. You must reference this form on your income tax return for the year you made the withdrawal.

Also, you must make the withdrawal within 30 days of taking title of the home. If you try to make the withdrawal more than 30 days after you take title of the home, your withdrawal will no longer be eligible for the HBP and you will be taxed on the amount you withdraw.

Finally, beginning 2 years from your purchase you must make annual payments over 15 years to pay back the loan to your RRSP. Canada Revenue Agency will send you a Notice of Assessment, which will indicate the amount of the loan you have repaid, the balance left to be repaid, and the amount of your next payment. To start repaying the loan, you must make a contribution to your RRSP in the year the repayment is due or in the first 60 days of the following year.

What happens if I miss making repayment to pay back the loan to my RRSP?

To start repaying the loan, you must make a contribution to your RRSP in the year the repayment is due or in the first 60 days of the following year.

Let's look at an example where you buy a home in 2013 and withdraw $15,000 from your RRSP to put towards your down payment. Your first payment is due two years later, in 2015.

Calculate the minimum annual RRSP repayment

$15,000 total RRSP withdrawal ÷ 15 years to repay = $1,000 minimum annual repayment