The RRSP Home Buyers' Plan, introduced in 1992, enables eligible taxpayers to withdraw up to $20,000 tax free from their Registered Retirement Savings Plan (RRSP) to buy a home.  The withdrawn amount must be repaid within 15 years.

To be eligible, you must be a Canadian resident who has entered into a written agreement to buy or build a "qualifying home" and intends to occupy that home as a principal place of residence within one year after acquiring it.

What is not very well known about the Home Buyers' Plan (HBP), is that you can contribute to your RRSP retroactively.  In a move to help savers, the latest federal budget provided an unlimited carry forward of unused contribution room rather than the previous seven-year limit.  You can take out a short term RRSP loan to cover your unused contributions from previous years.

After 90 days, you repay your loan by cashing in your RRSP, and apply your tax refund to the down payment on the purchase of your first home.  (Down payments must originate from a borrower's own resources or the funds may be borrowed against an equal amount of assets.  A tax refund is also acceptable for the down payment.

Using the HBP in this manner is a guaranteed way to also build on your retirement savings.  Every year, you will have to repay 1/15 of the total amount you have withdrawn from your RRSP until your withdrawls are repaid in full.

There are certain eligibility and qualifying criteria that must be met.  You should take the time to calculate the maximum tax-deductible amount of your RRSP contribution.  You can also get this information by calling Revenue Canada.  You should also discuss your options with both a tax consultant and your banker.

Keep in mind that for an eligible application for withdrawl from your RRSP for the Home Buyers' Plan, you must have signed a written agreement to buy or build a qualifying home.

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