Category Archives: RRSP HomeBuyers Plan

Mortgage Pre-Qualification vs Mortgage Pre-Approval vs Mortgage Approval

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Buying & Selling Tips

Mortgage Pre-Qualification vs Mortgage Pre-Approval vs Mortgage Approval

What are the differences between each stage of the mortgage process?
By Kara Kuryllowicz September 18, 2019

In early 2019, several Canadian banks launched digital apps that offer home buyers easy, hassle-free mortgage pre-qualification in 60 seconds or less. Sounds great, right?  The problem is many consumers believe a mortgage pre-qualification is a lot like a mortgage pre-approval or mortgage approval. As a result, prospective home buyers and sellers are left expecting the financial institution associated with the app to lend them hundreds of thousands of dollars, despite the fact they simply keyed their names, addresses, contact information and gross income into various online fields.

Getting Mortgage Approval

“Every week, as many as 40% of my new clients come to me because they’ve just bought a home and discovered that mortgage pre-qualification is meaningless and that they do not have the financing required for the purchase,” says Tracy Valko, owner and principal broker of Dominion Lending Centres Valko Financial Ltd., and a director at Mortgage Professionals of Canada.

Let’s get real: A mortgage pre-qualification gives the financial institution warm leads (names, contact information, purchasing timeline) and tells consumers how much money a financial institution might loan them. There is no way any financial institution will actually lend consumers hundreds of thousands of dollars just because they spent 45 seconds with the company’s mortgage pre-qualification tool.

Lenders do everything they can to ensure the borrower will repay the loan. A mortgage pre-approval looks at how an individual manages his/her money to determine that person’s creditworthiness. The next step is the mortgage approval which assesses that specific person’s ability to repay a loan of a certain amount at a set interest rate on a particular home.

“Always get a mortgage pre-approval before you start searching for a home and have a mortgage approval in place before you waive your financing condition on the offer – back out of a deal after it’s firm and you could be sued by the seller.” says Valko. “A mortgage pre-approval will tell consumers and their realtors what they can realistically afford to buy.”

Let’s further define the terms consumers need to fully understand before they commit to a real estate agent and start shopping for a home.

What is Mortgage Pre-Qualification?

It takes less than 60 seconds because it requests only the most basic information, whether it’s submitted to an online app or a financial representative. Mortgage pre-qualification never requires supporting documentation that proves the consumer actually has a full-time job, is paid a weekly salary and has earned a good credit score. At best, a mortgage pre-qualification can provide a very loose, broad estimate of a consumer’s home-buying power based on the consumer’s unverified data. Because the consumer typically inputs the information into an online tool, it takes just seconds for the software, not an experienced, professional underwriter, to pre-qualify a consumer for a mortgage.

If consumers notice and bother to read the apps’ fine print or legal disclaimers, they’ll likely see a statement like this one: “This is not a mortgage approval or pre-approval. You must submit a separate application for a mortgage approval or a mortgage pre-approval and a full credit report.”

In other words, they’re not actually promising you a dime, let alone enough the hundreds of thousands of dollars you’ll likely need to buy a home anywhere in Canada.

What is Mortgage Pre-Approval?

In general, it will take two to five business days to investigate an individual’s financial circumstances and the risk that a person might represent to the lender. The underwriter will need the basics, such as name, address and contact information in addition to detailed data on their income, assets (e.g. stocks, RRSPs, property, vehicles, savings), liabilities (e.g. debt, loans, mortgages) and their credit rating and report as well as the available down payment. Supporting documentation may be required to prove any or all of the above.

Unlike a pre-qualifying app, lenders’ underwriters may request a letter of employment, a Notice of Assessment, pay stubs, or T4 for the two most recent years as well as documentation indicating the down payment is available. The lender or mortgage broker will also require the consumers’ permission to pull credit scores and credit reports from organizations such as Equifax.

Your credit score, typically 300 to 800+, is based on feedback from lenders who confirm that you do or don’t pay your bills in full and on time every month. The credit report includes your name, address, social insurance number and date of birth as well as your credit history, for example, your debts and assets and whether you’ve ever been sent to collection or declared bankruptcy.

“Lenders want to know how well or how poorly you manage your money and will be looking for patterns of insufficient, late and missed payments,” says Valko.

A mortgage pre-approval is generally valid for up to 120 days at a specific interest rate unless the consumers’ circumstances change, for example, employment status, down payment, or income. For example, a consumer may not realize it, but their probationary status with a new employer, whether it’s three, six or 12 months, does matter to lenders. Likewise, a move from a salaried to a contract or self-employed position will also be seen as a higher risk.

“I’ve had clients believe they were full time, salaried employees, then discover they’re still on probation when we start underwriting,” says Valko. “An electrician client left his full-time salaried position to work independently and didn’t realize it negated his mortgage pre-approval, which was based on the guaranteed weekly paycheck versus the sporadic earnings associated with self-employment.”

What is Mortgage Approval?

This is the big one. Once consumers have identified the homes they want to purchase, they need mortgage approval to buy that specific home. Lenders assess the age and condition of the homes and consider comparable homes to confirm the price being paid is fair and market value. The mortgage approval is valid until the closing date unless the buyers’ circumstances change.

“Only the mortgage approval accounts for property specifics, such as taxes or condo fees, so give your underwriter/lender time to ensure the numbers previously used are still valid and that the property is acceptable to the lender,” says Valko.

If you’re serious about the home search and purchase process, skip the mortgage pre-qualification apps. Instead, take the time and make the effort to get mortgage pre-approval, then find the home suits you best, then get mortgage approval to close the deal. Then? Enjoy your new keys.

Source: REW.ca –  Kara Kuryllowicz September 18, 2019

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A first-time buyer’s guide to choosing a mortgage plan that’s right for you

I used to think I had a pretty good understanding of mortgages — you contribute a downpayment (a minimum of five percent of the property value if you’re in Canada) and someone (usually a bank) lends you the rest. If you fail to pay your mortgage back, your lender can take your house away. Ouch.

When I started looking into buying a cottage, I realized my mortgage knowledge fell seriously short (by the way, the cottage is the inspiration behind our brand new newsletter called The Ladder, about the climb on and up the property ladder). Early on, I jumped on an online calculator and immediately had a lot of questions. How can these interest rates vary so wildly? What is a fixed versus variable mortgage? What does amortization mean? If I put down less than 20 percent will terrible things happen to me and everyone I love? They don’t teach this stuff in school and I learned there is no one-size-fits-all mortgage plan that will work for everyone.

Photo: Romain Toornier 

Enter Matt Yakabuski, an Ontario-based mortgage broker — here to break it all down and help you, me, all of us— understand the variables to help pick the best mortgage plan. If you’re Oprah, or just won the lottery — feel free to stop reading. Everyone else, buckle in!

And if you’re curious, I’ll be sharing more about my cottage mortgage in the next newsletter, landing in your inbox on Wednesday, April 3rd — sign up here!

Um, where do I get a mortgage?

Mortgages usually come from either a bank or a broker.

Think of your mortgage broker as your personal mortgage shopper — they are provincially licensed professionals who have access to multiple lenders, including all of the major banks. They will listen to your needs and goals, analyze the numbers, help you through the qualifying process and find a mortgage product that fits just so.

“Online, you’ll get an idea of what the rates are generally, but they vary based on the downpayment amount, the location, your credit, your income and more. No two deals are alike, no two clients are alike, no two properties are alike,” says Yakabuski.

Banks are trusted, federally regulated lenders that can only access and offer you their own rates and products. You can also get a mortgage from a credit union (an increasingly popular option ever since the mortgage stress test was introduced) or a non-traditional Mortgage Investment Corporation. MICs are typically used by Canadians who have not qualified with traditional lenders and are willing to gobble higher interest rates to get into the property game.

Photo: CreditRepairExpert

How do I qualify for a mortgage?

To qualify for a mortgage, you have to prove to your lender that you can afford it and have a steady stream of income to keep up with payments. They will take a look at your income before taxes, living expenses, your credit score and all of the debts you carry. They will also look at your downpayment amount and the terms of your mortgage.

“Your debt servicing ratio is the main measure we use to qualify people for their mortgage,” says Yakabuski. “Depending on your credit score, you’re allowed to put a maximum of 44 percent of your total income towards debt servicing. This covers your mortgage, your property tax, credit card bills, car loans and any lines of credit.” If your debt eats up more than 44 percent of your income, you won’t be approved by traditional lenders.

Will I pass the mortgage stress test?

As of January 1st, 2018, you also have to pass the mortgage stress test — a calculation used by federally regulated lenders to determine if homebuyers can keep up with their mortgage payments if interest rates were to rise. If you can demonstrate that you can withstand your mortgage at the Bank of Canada’s benchmark qualifying rate (at 5.34 percent at the time of writing) or your interest rate plus two points — whichever amount is greater — you pass.

The mortgage stress test has reduced purchasing power by just under 20 percent. But as Yakabuski puts it, “If interest rates do go up, you know you can afford it.”

Photo: adventures_of_pippa_and_clark/Instagram

Should I take the biggest loan I can get?

Your lender will tell you the maximum loan you can qualify for (and they can help you find ways to increase that amount). But the maximum isn’t necessarily the loan you should take.

“Instead of my clients asking me what they can afford, I ask them what they’re comfortable spending on a monthly basis on their mortgage, property tax, heat, hydro, that kind of thing. And then we’ll work backwards,” explains Yakabuski.

Everyone has different comfort levels. “Some people are conservative and some people just want to hit their maximum,” he says. In the end, it all comes down to budgeting and making sure you don’t completely wipe out your bank account and end up house poor. If you have to beg your in-laws to cover the closing costs, can’t afford to hire movers or even get the nice coffee beans you like — you may want to consider getting less house than you can actually qualify for, but more financial freedom.

Photo: mandimakes/Instagram

Finding the “best rate” is not as easy as it looks

You may have seen a low rate on a website or on the window at the bank, but not every rate is for you and you have to read the fine print. There are rates for refinancing, rates for rental properties, rates if you’re putting more than 20 percent down (uninsured) and rates if you’re putting less (insured), and on and on.

“Your friend who got a 2.49 percent interest rate six months ago, sorry to say — that’s just not available today — and even if it was, it doesn’t mean you could have gotten it. If you find a rate that seems like a much better deal than everywhere else, there’s probably a reason for that,” explains Yakabuski.

For example, restricted mortgages, which often have lower rates but inflict painful penalties if you break them and prohibit you from refinancing elsewhere before your term is up. “If I sell you a restricted mortgage and then in two years, you have to sell the property, I don’t want to say, ‘Sorry, your penalty is going to be triple the amount of a regular penalty because it was a restricted deal.’ Anyone who is looking out for your best interest is going to take into consideration the portability of the mortgage.”

Photo: James Bombales

How long should my term and amortization be?

The term you choose will have a direct impact on your mortgage rate and how long you’re locked in to the rate, lender, and various terms and conditions of your mortgage product.

“A shorter term length has historically proven to have a lower interest rate. Right now, not so much,” explains Yakabuski. Terms can range from six months to 10 years. “Most people choose a five-year because it’s often the longest term for the best rate.”

Your mortgage amortization period is the length of time it will take you to pay off your entire loan. In Canada, the maximum amortization period is 35 years — but you’ll only have access to this timeframe if you’re putting down more than 20 percent. If you’re putting down less than 20 percent and have an insured mortgage, the maximum amortization period is 25 years.

If you go with a longer amortization period, you will have smaller monthly payments, but keep in mind: you’ll pay more in the long run in interest over the life of your mortgage.

Depending on your mortgage commitment, lenders will only allow you to pay so much extra towards a mortgage before they start penalizing you. How’s it’s calculated depends on the product you’re in and what lender you’re with, but in many cases you will have the opportunity to make lump-sum payments towards your mortgage, to double up payments or to increase the payment amount.

“I suggest taking the highest amortization possible, but if you have the affordability to pay more, make sure you do,” says Yakabuski. “Even with a longer amortization, you effectively could pay at the rate of a 15- or 20-year amortization, saving you thousands of dollars in interest by paying the principal off that much quicker. But should your financial situation change, you could scale back your payments all the way to the 25-year if you have to.”

Photo: James Bombales

Should I get a fixed or variable mortgage?

Fixed mortgages mean the rate you settle on will be your rate for the entire term of your mortgage. A variable rate is going to fluctuate based on what the prime rate is doing (at the time of writing, it’s currently sitting at 3.95 percent). If the prime rate goes down, your rate and payment will go down and vice versa. With a variable rate, there is often an opportunity to save money, but you have to be comfortable with some risk.

Choosing the right strategy often comes down to flexibility. Many Canadians default to a five-year fixed rate mortgage, but if there’s a possibility you may be moving on before then, the penalty for breaking the term can get costly, whereas a variable mortgage will cost you three months of interest.

“Variable is a good option because they traditionally have a lower interest rate and you have flexibility should you need to get rid of it quicker with the smallest penalty possible,” says Yakabuski.

Should I go for an open or closed mortgage?

Let’s say you come into a large inheritance and want to pay off your mortgage in full or you unexpectedly have to ditch your property before the term is up.

With a closed mortgage, you cannot repay, renew or renegotiate before the term is up without incurring penalties. With an open mortgage, you can do all of the above without penalty — but the interest rates are often much higher.

“I rarely recommend an open mortgage, even when people say they’re going to flip the property,” says Yakabuski. “The reason is because an open mortgage right now has an interest rate of about six percent (all open terms are variable). Whereas the interest on a closed, variable mortgage is, let’s say, three percent less. If you’re going to sell the place inside two, maybe three months, then open makes sense. But if you’re going to keep it for four months plus, generally the three-month interest penalty on breaking a closed, variable mortgage can save you thousands in just six months.”

Photo: alyssacloud_/Instagram

Now for the fun part — finding a home

Before you even start looking at properties, it’s important to get your finances in order so you can crunch the numbers when you do find places you like. You’ve saved for a downpayment, qualified for a loan and have chosen a mortgage plan that is right for you. You’re officially a mortgage badass and it’s time to start house hunting. You’ve got this.

Source: Livabl.com –  

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RRSP 2016: 2 good reasons to withdraw money from your retirement fund

The Home Buyers' Plan allows an individual to take $25,000 from an RRSP or a couple to withdraw $50,000 and put it toward buying or building a first home. But it has to be repaid. A similar program exists if you're going back to school.

The federal government has created two programs that allow you to withdraw money from an RRSP without a penalty before you retire — theHome Buyers’ Plan and the Lifelong Learning Plan.

Whenever you take money from a registered retirement savings plan, you are taxed on it at your marginal tax rate, so you lose 12 to 49 per cent of your savings off the top to the tax man, depending on your income and where you live.

There are plenty of bad reasons to withdraw money from your RRSP – among them needing cash for a vacation, wanting to buy a car or giving money to the kids.

The best reason to take out money is because you are retired and want to convert it into a registered retirement income fund that will pay your bills. At that point, you are likely to be in a much lower tax bracket than when you were working.

Financial advisers point out that if you do withdraw money, you miss out on several years of the compound growth you would have on the RRSP investment.

But both buying a house and getting an education are investments in themselves that can pay off in the longer term.

Here’s how those two programs work.

Home Buyers’ Plan

Each individual can withdraw up to $25,000 to buy or build their first home or to buy a home for a related person with a disability by applying under the Home Buyers’ Plan.

For couples who are first-time buyers, that’s up to $50,000 toward a first home. The down payment is often a stretch for young buyers and putting more than 20 per cent down means escaping the additional cost of CMHC insurance.

Buyers have to enter into a written agreement to build or buy the home, and it must take effect before Oct. 1 that year or after the year of withdrawal.

For those who are buying for a relative with a disability, it is the relative who must have entered into such an agreement.

The buyer, i.e. the person with the disability, has to live in the home. It can’t be a rental property.

The catch is that anyone taking advantage of the program must pay back what they took out of their RRSP within 15 years, starting in the second year after purchase of the home.

A bank can help you set up regular withdrawals so you meet the repayment schedule. Many people are house-poor in the first few years of home ownership, so it can take a lot to structure their finances to both pay the mortgage and refund their RRSPs.

There’s a financial penalty from the government if you don’t – they’ll start taxing you on the money you withdrew.

And when you repay the money to your RRSP, there won’t be a tax deduction from your income, because you got that deduction the first time around.

It’s a popular program. According to research from the Canada Revenue Agency, 1.8 million Canadians have used the Home Buyers’ Plan since 1992, borrowing more than $18 billion from their own savings.

But for the 2011 tax year, 47 per cent had paid less than the full required repayment and were being taxed for using it.

Lifelong Learning Plan

The Lifelong Learning Plan allows you to borrow up to $10,000 a year to finance full-time education at a qualifying school. You can withdraw a maximum of $20,000 over a period of four years from an RRSP owned by yourself or your spouse. If you both go back to school, you can withdraw up to $40,000.

It is essentially an interest-free loan from the RRSP to finance retraining, but only for you and your spouse. It can’t be used for your children.

To take the money out of the RRSP, you must be enrolled in a school that qualifies for the education tax credit or have received a written offer to enrol by March of the following year.

By the fifth year after the first LLP withdrawal — or the second year after you stop going to school full-time —  you must start repaying into your RRSP. The first year, you’re expected to repay a minimum of one-tenth of what you owe, though you can repay it faster. You have 10 years to make up the full amount.

As with the Home Buyer’s Plan, the government will begin taxing you on the money if you don’t rebuild your RRSP.

If you’re earning a significant income and would benefit from the tax deduction a regular RRSP contribution would get you, then keeping to the 10-year repayment schedule and also making regular RRSP contributions makes sense.

You can use the LLP as many times as you like up to the age of 71, as long as you have repaid back the money you took out for previous LLPs. It can be a tool to retrain if you are thrown out of a job — without the penalty of paying tax you would otherwise owe on an RRSP withdrawal.

The CRA has not released recent figures on hwo many Canadians take advantage of the LLP.

Source: CBC News Posted: Jan 02, 2016

For more information on the RSP Home Buyers Plan, contact the Ray C. McMillan mortgage team to schedule your no obligation consultation and get into your new home faster.

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Finance minister announces down payment rule changes

New down payment rules will go into effective February 15, 2016.

“The Government’s role in housing is to set and maintain a framework that is equitable, stable and sustainable. The actions taken today prudently address emerging vulnerabilities in certain housing markets, while not overburdening other regions,” Finance Minister Bill Morneau said in a release. “They also rebalance government support for the housing sector to promote long-term stability and balanced economic growth.”

The minimum down payment for new insured mortgages will increase from 5% to 10% for the portion of the house price above $500,000, the finance ministry wrote.

For example: A $750,000 home will now require $50,000 down — 5% for the first $500,000 and 10% down for the remaining $250,000.

Properties up to $500,000 will continue to require a minimum of 5% down. Properties in excess of $1 million will still require 20% down.

The changes are meant to reduce taxpayer exposure while supporting long-term stability of the housing market, according to the ministry.

“This measure will increase homeowner equity, which plays a key role in maintaining a stable and secure housing market and economy over the long term,” Morneau said. “It also protects all homeowners, including many middle class Canadians whose greatest investment is in their homes.”

Source: MortgageBrokerNews.ca – Justin da Rosa | 11 Dec 2015

 

To find out more about this new change and how it may affect your home purchase, schedule your appointment with the Ray C. McMillan Mortgage Team or visit www.RayMcMillan.com

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How can I participate in the Home Buyers’ Plan?

How can I participate in the Home Buyers’ Plan?

To participate in the HBP, you must meet both the HBP eligibility and RRSP withdrawal conditions.

On this page:

Do I meet the HBP eligibility conditions?

  • You must be considered a first-time home buyer.
  • You must have a written agreement to buy or build a qualifying home for yourself, for a related person with a disability, or to help a related person with a disability 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 buy or build a qualifying home, it is the related person with a disability who must have entered into such an agreement.

  • You must intend to live in the qualifying home as your principal place of residence within one year after buying or building it. If you buy or build a qualifying home for a related person with a disability, or help a related person with a disability buy or build a qualifying home, you must intend that that person lives in the qualifying home as his or her principal place of residence.

In all cases, if you have previously participated in the HBP, you may be able to do so again if your repayable HBP balance on January 1 of the year of the withdrawal is zero and you meet all the other HBP eligibility conditions.

Am I a first-time home buyer?

Normally, you have to be a first-home buyer to withdraw funds from your RRSPs to buy or build a qualifying home.

You are considered a first-time home buyer if, in the four year period, you did not live in a home that you or your currentspouse or common-law partner owned.

Note

Even if you or your spouse or common-law partner has previously owned a home, you may still be considered a first-time home buyer.

The four-year period:

Begins on January 1 of the fourth year before the year you withdraw funds; and

Ends 31 days before the date you withdraw the funds.

For example, if you withdraw funds on March 31, 2015, the four-year period begins on January 1, 2011 and ends on February 28, 2015.

If you have a spouse or common-law partner, it is possible that only one of you is a first-time home buyer.

Can you participate in the HBP later?

If you are not considered a first-time buyer now, you may be considered a first-time home buyer later, once the four-year period has passed.

For example, if in 2009 you sold the home you lived in before, you may be able to participate in 2014. Or if you sold the home in 2010, you may be able to participate in 2015.

Am I building or buying a qualifying home?

You are considered to buy or build a qualifying home if:

  • you buy or build it, or you are considered as buying or building it, before October 1 of the year after the year of the withdrawal;
  • you buy or build it, alone or with one or more individuals;

Note

We consider you to have built a qualifying home on the date it becomes habitable.

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

A replacement property has to meet the same conditions as a qualifying home. To inform us that you are buying or building a replacement property, send a letter to the following address:

Pension Workflow Section
Ottawa Technology Centre
875 Heron Road
Ottawa ON  K1A 1A2

Give your name, address, and social insurance number, as well as the address of the replacement property. You have to say in the letter that you intend to live in the replacement property as your principal place of residence within one year after you buy or build it.

Note

If you already withdrew, from your RRSPs, the $25,000 maximum allowed under the HBP, you cannot make any more HBP 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 after the year you withdrew the funds, we still consider you to have met the deadline if either of the following situations applies:

  • You had a written agreement, in effect on October 1 of the year after the year you withdrew the funds, to buy a qualifying home or replacement property, and you buy the property before October 1 of the second year after the year of the withdrawal. In addition, you have to be a Canadian resident up to the time of purchase.
  • You had paid an amount after the date of the first withdrawal and before October 1 of the year after the year you withdrew the funds 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 all withdrawals under the HBP.

Participating in the HBP for a related person with a disability?

Under the HBP, the home must better fit the needs of the disabled person than his or her current home. You can withdraw funds from your RRSPs under the HBP to buy or build a home, if:

  • you are a person with a disability;
  • you are buying or building a home for a related person with a disability;
  • you are helping a related person with a disability to buy or build a home.

Regardless of the situation, you are responsible for making sure that all applicable HBP conditions are met.

If, at any time during your participation period, a condition is not met, your withdrawal will not be considered eligible and it will have to be included as income on your income tax return for the year it is received.

Is my Home Buyers’ Plan balance up to date?

(If you have never participated in the HBP this section may not apply.)

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 withdrawing funds under the HBP;
  • you meet all the other HBP conditions that apply to your situation.

Your HBP balance from your last participation is zero when the total of your yearly designated HBP repayments and any amounts included in your income (because no designated HBP repayment was made as required for a given year) equals the total eligible withdrawals you made from your RRSP under your participation in the HBP.

Note

The RRSP or PRPP 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. For more information about designating HBP repayments, see repaying your withdrawals.

Do I meet the RRSP withdrawal conditions?

  • You have to be a resident of Canada at the time of the withdrawal.
  • You have to receive or be considered to have received, all withdrawals in the same calendar year.
  • You cannot withdraw more than $25,000.
  • Only the person who is entitled to receive payments from the RRSP can withdraw funds from an RRSP. You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP. Your RRSP issuer will not withhold tax on withdraw amounts of $25,000 or less.
  • Normally, you will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP.
  • Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP. If this is not the case, the contributions may not be deductible for any year.
  • Neither you nor your spouse or common-law partner or the related person with a disability that you buy or build the qualifying home for can own the qualifying home more than 30 days before the withdrawal is made.
  • You have to buy or build a qualifying home for yourself, for a related person with a disability, or to help a related person with a disability buy or build a qualifying home before October 1 of the year after the year of the withdrawal.
  • You have to complete Form T1036, Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal.

Note

You are responsible for making sure that all HBP conditions are met. If you make a RRSP withdrawal under the HBP and a condition is not met, your RRSP withdrawal(s) may not be considered eligible. You will have to include part or all of the withdrawal(s) as income on your income tax return for the year you received the funds. If we have already assessed your income tax return for that year, we will reassess it to include the withdrawal(s). If you do not meet the conditions to participate in the HBP in the current year, you may be able to participate in future years.

Am I 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 you buy or build a qualifying home. For more information about residency status, see Residency status or call 1-800-959-8281 (toll free within Canada and the United States), or 613-940-8495 (from outside Canada and the United States). We accept collect calls by automated response. You may hear a beep and experience a normal connection delay.

If you become a non-resident after a qualifying home is bought or built, you cannot cancel your participation in the HBP. However, special rules will apply to the repayment of your HBP balance. For more information, see The HBP participant becomes a non-resident.

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