What the Home Buyers’ Plan (HBP) Actually Is
The Home Buyers’ Plan (HBP) lets you pull money from your RRSP to buy a home.
- You can withdraw up to $60,000 per person
- Couple = $120,000 total
Sounds great? Yes.
But here’s the reality:
👉 It’s not free money
👉 It’s a loan from your future retirement
How Much You Can Withdraw
- Individual: $60,000
- Couple: $120,000
Conditions:
- Must be a first-time home buyer (or meet CRA exceptions)
- Funds must be in RRSP for at least 90 days
Repayment Timeline (With Example)
You don’t repay immediately.
- Repayment starts after 2 years
- Total repayment period: 15 years
Example:
- You withdraw: $60,000
- Annual repayment: $4,000/year
If you skip:
That year’s amount gets added to your taxable income
What Happens If You Miss Repayments
Let’s not sugarcoat this.
If you don’t repay:
- CRA treats it as income
- You pay tax on that portion
Example:
- Miss $4,000 repayment
- That $4,000 is added to your income
- You pay tax based on your bracket
It’s basically a forced tax penalty
How HBP Impacts Your Retirement (Most Ignored Part)
This is where people mess up badly.
You’re pulling money out of a tax-deferred growth engine.
Let’s say:
- You withdraw: $60,000
- Average return: 6%
After 15 years, that money could have been:
👉 ~$143,000
Instead:
- You’re slowly putting it back
- Missing compounding growth
Real cost = lost investment growth, not just the withdrawal
Common Mistakes First-Time Buyers Make
1. Using HBP Without a Repayment Plan
They assume “I’ll handle it later”
Reality:
Most don’t → leads to tax hits
2. Emptying Their RRSP Completely
Now they have:
- No retirement cushion
- No emergency buffer
3. Using It When They Don’t Need It
If you already have enough down payment:
You’re just hurting future wealth
4. Ignoring Opportunity Cost
They see:
“$60K for house”
They don’t see:
“$80K–$100K+ lost future value”
Does Using HBP Make Your Mortgage Stronger or Weaker?
This is where you need clarity.
Stronger:
✔ Increases your down payment
✔ Helps you qualify easier
✔ Can reduce CMHC insurance cost
Weaker:
Reduces your financial reserves
Shows less post-closing liquidity
Adds future repayment pressure
Lenders don’t care about HBP itself
They care about your overall financial stability
Smarter Alternatives (Most People Ignore These)
If you’re thinking long-term, look at:
1. First Home Savings Account (FHSA)
- Tax-free contributions
- Tax-free withdrawals
Way better than HBP if planned early
2. Keep RRSP Invested + Use Smaller Down Payment
- Pay slightly higher mortgage
- Keep compounding working
3. Combine HBP + Cash Strategy
- Don’t max it out blindly
- Use only what’s needed
FAQ
Is HBP free money?
No.
It’s your own money — with a repayment obligation.
Do I pay interest on HBP?
No interest.
But the real cost is lost investment growth.
Can I repay faster?
Yes.
No penalty for early repayment.