Canadians making a first HBP withdrawal between now and Dec. 31 have until 2030 before they must start repaying amounts, while a homebuyer making a HBP withdrawal starting Jan. 1, 2026, has to start repaying amounts in 2028.Drazen Zigic/AFP/Getty Images
First-time homebuyers have until the end of this year to take advantage of a temporary relief measure giving them a five-year grace period before they have to start repaying amounts borrowed under the Home Buyers’ Plan (HBP).
Starting in 2026, eligible first-time buyers borrowing from their registered retirement savings plan (RRSP) under the HBP program will once again have a two-year grace period before having to start making repayments.
It means someone making a first HBP withdrawal between now and Dec. 31 to buy a home will have until 2030 before they must start repaying amounts, while a homebuyer making an HBP withdrawal starting Jan. 1, 2026, has to start repaying amounts in 2028.
The deadline to qualify for the longer grace period is even sooner for people who plan to make an RRSP contribution and then use it toward the HBP. That’s because any money withdrawn under the HBP must have been in an RRSP for at least 90 days for that contribution to be fully tax-deductible. The last day to make a new contribution to an RRSP and withdraw that amount under the HBP this year — and still qualify for the five-year grace period — would be Oct. 2.
The HBP allows first-time homebuyers to borrow amounts from their RRSP on an interest-free basis to use as a down payment for the purchase of a home. To withdraw RRSP amounts under the HBP, the homebuyer must have entered into a written agreement to buy or build a qualified home.
Amounts withdrawn under the HBP must be repaid to the RRSP over 15 years, following the grace period, in equal annual instalments.
If an HBP borrower doesn’t make their annual HBP instalment repayment, that amount is added to the borrower’s income for the year. The HBP withdrawals can also be paid back sooner. HBP repayments are not tax-deductible.
In the 2024 federal budget, the Liberal government announced changes to the HBP intended to provide more help to first-time homebuyers looking to enter the housing market.
Most notably, it raised the HBP withdrawal limit to $60,000 from $35,000, a permanent change effective after April 16, 2024, the date of the budget.
“Home prices have gone up — steeply,” the government said in its 2024 budget document. “Support to help first-time buyers save must keep pace with market prices.”
Ottawa also announced the temporary extension of the HBP repayment grace period to five years from two, applicable to HBP borrowers who made a first withdrawal any time between Jan. 1, 2022 (retroactively) and Dec. 31, 2025.
In a response sent by e-mail to a question from The Globe, Department of Finance spokesperson Benoit Mayrand wouldn’t say whether the government was considering extending or making permanent the five-year HBP repayment grace period beyond this year.
“The Government of Canada regularly reviews its housing programs to ensure they remain as efficient, effective, and fair as possible - this is no different. However, it would be inappropriate to speculate on any potential or prospective changes at this time,” Mr. Mayrand wrote.
Doug Carroll, tax and estate specialist at Aviso Wealth in Toronto, says the extended grace period could help first-time homebuyers who find themselves cash poor after purchasing a property.
“It gives them an opportunity to just sit back a little bit, get settled into their home, and then start repaying the money,” he says.
In most years, his advice to first-time buyers is to make a first HBP withdrawal early in a calendar year as opposed to late in the previous one, if they have the flexibility to do so. Withdrawing earlier in the year allows an HBP borrower to maximize the time they have before they must begin making HBP repayments.
However, the opportunity to take advantage of an extended five-year grace period that ends this year might turn that planning on its head for this year only, Mr. Carroll says.
Although the HBP allows Canadians an opportunity to build a larger down payment, first-time homebuyers need to remember that the HBP represents a loan from one’s RRSP that must be repaid, he notes. Some first-time buyers can be unpleasantly surprised when the time comes to begin making HBP repayments.
“It’s effectively like having an extra mortgage payment,” he says.
Jason Heath, managing director of Objective Financial Partners Inc. in Markham, Ont., says that the prospect of using the HBP may mistakenly motivate young homebuyers to contribute to an RRSP when they’re still in their lower-income earning years and not in a position to benefit much from the corresponding deduction on the RRSP contribution.
Then, after repaying the HBP amounts, those homebuyers may find themselves paying taxes at a higher rate if they make RRSP withdrawals in years when they’re earning a higher income, Mr. Heath says.
Mr. Carroll says he favours the first-home savings account (FHSA), which the federal government introduced in 2023, over the HBP. Contributions to the FHSA are tax-deductible, while withdrawals are tax-free when used to buy an eligible home.
The FHSA “gives people true relief on accumulating money toward a down payment, where they don’t get surprised later on and hurt themselves by having overextended,” Mr. Carroll says.