Canadians who have RRSPs have the opportunity to withdraw up to twenty thousand dollars tax free to use as a down payment on a home. This money also does not have to be claimed as income on your tax return. This is a great opportunity for those who wish to be homeowners, but cannot afford to save for the down payment and contribute to their retirement savings.

The Federal Home Buyers Plan is available to those who qualify as "first time" homebuyers. This is defined as any Canadian who has not owned a home that they have occupied as their principal residence for a minimum of five years. You can qualify for the program at any time during the fifth calendar year since owning a home. This rule applies to both you and your spouse regarding previous home ownership. If you have owned a home within the previous five years, but your partner has not, then while you are not eligible, your partner will be. However, if you are using the homebuyers plan again, you must not have an outstanding balance on the previous Home Buyer Plan loan.

There are certain criteria that must be met in order to qualify for the HMP plan.  You must be considered a factual resident of Canada, meaning that even if you are not currently living in Canada, you are considered a Canadian resident for income tax purposes. You must also enter into a written agreement (offer of purchase) to buy or build a qualifying home. This agreement can be with the builder, contractor, realtor or private seller. It is important to know that simply obtaining a pre-approved mortgage does not satisfy this requirement. You must also intend to occupy the home as your principal place of residence within one year of buying or building your home. Certain exceptions can be made if you are unable to reside in the home, as long as your original intention was to move in within a year. As well, either you or your spouse (this includes common law spouses) cannot own the home more than 30 days before the planned withdrawal.

You must make the withdrawal request for the funds in the same year in which you wish to participate in the Home Buyers Plan. Each person (if applicable) can withdraw a maximum of twenty thousand dollars from your own RRSPs. Multiple withdrawals however, are allowed. The home that you are buying must be located in Canada, and can be either an existing home or a home under construction. This includes single detached family home, semi-detached homes, town home, mobile home, condominium unit, a share in a co-op, or an apartment.

You must begin repaying the withdrawal under the HBP starting the second year following the year in which you made the withdrawal. You make the repayments by contributing to any of your RRSPs in the year the repayment is due or within the first 60 days of the following year. However, you cannot designate sums to be considered s payments to your spouse’s (including common-law) RRSP are not considered payments, and vice-versa. As well, transferring amounts from another registered pension plan, deferred profit-sharing plan or registered retirement income fund will not be considered as a payment.