Introduction

The Home Buyers' Plan (HBP) is a federal program that allows eligible first-time buyers to withdraw up to $60,000 from their Registered Retirement Savings Plan (RRSP) tax-free to fund a home down payment.

However, the HBP is not a grant—it is an interest-free loan from your retirement savings. You must repay the withdrawn amount back into your RRSP over a 15-year period.

In this guide, we explain the HBP repayment rules and how to avoid tax penalties. You can model your home savings strategy using our FHSA vs RRSP Calculator.

The Repayment Timeline

• 2-Year Grace Period: You have up to 2 years after the year you withdraw the funds before you must start making repayments. For example, if you withdraw funds under the HBP in 2026, your first repayment year is 2028.
• 15-Year Schedule: You must repay 1/15th of the total withdrawn amount each year. The CRA will send you an HBP statement showing your required repayment amount and remaining balance on your annual Notice of Assessment.

How to Make Your HBP Repayments

Making a repayment is a simple two-step process:

1. Contribute to your RRSP: Make a normal contribution to any RRSP account during the tax year (or within the first 60 days of the following year).
2. Designate the contribution: When filing your taxes, fill out Schedule 7 to designate the contribution (or a portion of it) as an HBP repayment instead of a regular deduction.

What Happens if You Miss a Repayment?

If you fail to make your required annual repayment, the missing amount is treated as taxable income for that year.

• Tax Penalty: You must pay personal income tax on that amount at your marginal tax bracket.
• Lost Room: Once an unpaid HBP amount is taxed as income, that RRSP contribution room is lost forever.

Conclusion

Understanding your HBP repayment schedule helps you maintain your retirement nest egg while avoiding unnecessary taxes on your annual returns.

To compare HBP rules with the repayment-free FHSA, check out the FHSA vs RRSP Calculator.