Key Takeaway

The Home Buyers’ Plan (HBP) allows eligible Canadians to withdraw up to $35,000 from their RRSP tax-free to purchase or build a qualifying home. You must repay the amount over 15 years, starting the second year after withdrawal. If you miss a repayment, the CRA adds that amount to your taxable income for the year.

What Is the Home Buyers’ Plan?

The Home Buyers’ Plan is a federal program administered by the Canada Revenue Agency that lets first-time home buyers borrow from their own Registered Retirement Savings Plan to finance a down payment or cover other home purchase costs. Unlike a regular RRSP withdrawal, which triggers immediate taxation, an HBP withdrawal is tax-free as long as you repay the borrowed amount within the required timeframe.

According to the Canada Revenue Agency, the HBP recognizes that saving for both retirement and a down payment simultaneously places significant pressure on younger Canadians (CRA, 2026). The program effectively converts your RRSP into a short-term, interest-free loan to yourself.

Why the HBP Matters

Home prices in Canadian cities have risen faster than wage growth for more than a decade, making the down payment barrier the single largest obstacle for first-time buyers. The HBP provides access to funds you have already saved in a tax-sheltered account, which can be particularly valuable if you are still building your non-registered savings.

The plan also lets you claim the RRSP deduction in the year you contribute, then withdraw those same funds tax-free under the HBP shortly after. This creates a temporary tax arbitrage: you reduce taxable income when you contribute, then access the funds without paying tax on the withdrawal.

As foundational finance texts such as Principles of Finance explain, leveraging tax-deferred accounts for major life purchases requires understanding both the short-term cash flow benefit and the long-term retirement opportunity cost.

How the Home Buyers’ Plan Works

Eligibility

To use the HBP, you must meet the CRA’s definition of a first-time home buyer: you cannot have owned a home that was your principal residence at any time during the four-year period before the withdrawal (or in the year of withdrawal). If you are buying with a spouse or common-law partner, both of you must meet this test independently.

You must also be a Canadian resident when you withdraw the funds and when you acquire the home. The home you purchase must be located in Canada and must become your principal residence within one year of buying or building it.

Withdrawal Limit and Timing

The maximum you can withdraw under the HBP is $35,000 per person (as of 2026; verify the current limit on the CRA website before acting). A couple can therefore withdraw up to $70,000 combined if both have sufficient RRSP balances and both meet the eligibility criteria.

The funds you withdraw must have been in your RRSP for at least 90 days before the withdrawal. If you contribute to your RRSP specifically to fund an HBP withdrawal, you must wait 90 days after the contribution clears before making the HBP request. This rule prevents immediate tax-deduction arbitrage.

You must complete the purchase or construction of your home by October 1 of the year following the year of your first HBP withdrawal. If you miss this deadline, the withdrawn amount becomes taxable income.

Read also: RRSP Home Buyers Plan: How to Borrow from Your RRSP for Your First Home in Canada

Repayment Rules

Repayment begins two years after the year you first withdrew funds. If you withdrew in 2026, your first repayment is due by March 1, 2029 (the RRSP contribution deadline for the 2028 tax year). You have 15 years to repay the full amount in equal annual instalments.

For example, if you withdrew $35,000, your minimum annual repayment is $2,333 ($35,000 divided by 15). You make repayments by contributing to your RRSP and designating the contribution as an HBP repayment on your tax return (Schedule 7). If you do not designate a repayment or repay less than the minimum, the shortfall is added to your taxable income for that year.

You can repay more than the minimum in any given year, which reduces future required repayments. Early full repayment is allowed and carries no penalty.

HBP vs. FHSA: Choosing the Right Tool

The First Home Savings Account (FHSA), introduced in 2023, offers an alternative path for first-time buyers. The FHSA combines the RRSP’s tax deduction on contributions with the TFSA’s tax-free withdrawals for a qualifying first home purchase. The annual contribution limit is $8,000, with a lifetime limit of $40,000.

Unlike the HBP, FHSA withdrawals for a home purchase do not need to be repaid. This makes the FHSA a more straightforward saving vehicle if you are still several years away from buying. However, if you need a down payment sooner than the FHSA timeline allows, or if your RRSP balance is already substantial, the HBP remains the faster route.

You can use both programs together. A couple could withdraw $70,000 via the HBP and also withdraw up to $80,000 from their combined FHSAs (if they have maximized contributions), for a total of $150,000 in tax-advantaged down payment funding.

Trade-Offs and Considerations

The primary trade-off of the HBP is retirement savings opportunity cost. Every dollar you withdraw stops compounding in your RRSP. If you withdraw $35,000 at age 30 and that amount would have grown at 6 percent annually, you forgo roughly $200,000 in retirement savings by age 65 (assuming no repayment). Even with disciplined repayment, you lose years of compound growth.

The HBP works best when your alternative is high-interest debt (such as borrowing the down payment on a credit card or line of credit) or when you can repay quickly and resume regular RRSP contributions. It works poorly if repayment stretches your budget so tightly that you cannot contribute additional retirement savings beyond the minimum HBP instalments.

According to the Financial Consumer Agency of Canada, many HBP users fall behind on repayments, inadvertently converting what was meant to be a loan into taxable income spread over several years (FCAC, 2026).

Conclusion

The Home Buyers’ Plan provides a tax-efficient bridge to home ownership for Canadians who have built RRSP savings but lack sufficient cash for a down payment. It offers up to $35,000 per person in interest-free, tax-deferred borrowing, with 15 years to repay. When used strategically and combined with disciplined repayment, it can accelerate your path to ownership without derailing long-term retirement goals. For personalized advice on whether the HBP or FHSA better fits your situation, consult a Certified Financial Planner or CPA who understands your complete financial picture.