The Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA) are only available in Canada. They each have their own rules for investing and uses. Most Canadians know these plans exist, and hopefully have funds in one or both of these important account types, but many people don’t know how to use them to invest in real estate.
After putting money into your Registered Retirement Savings Plan (RRSP), you may be wondering, “Can I use this money to buy a house?” The short answer is yes, you can. The Home Buyers’ Plan (HBP) makes this possible. But it’s not as simple as taking money out of your retirement savings.
As someone who’s helped many first-time homebuyers navigate this process, I’ll walk you through everything you need to know about using your RRSP to make your homeownership dreams come true.
What Exactly is the Home Buyers’ Plan (HBP)?
The Home Buyers’ Plan is a Canadian government program that allows you to withdraw money from your RRSP tax-free to purchase or build a qualifying home. It’s basically the government saying, “We know saving for retirement is important, but we also understand that buying a home is a priority for many Canadians.”
People can borrow money from their retirement savings through this program to help them buy a house now. Pretty neat right?.
How Much Can You Withdraw Through the HBP in 2025?
The withdrawal limit has increased over the years
- Previously, it was $25,000 per individual
- As of 2024, you can withdraw up to $35,000 from your RRSPs under the HBP
- For couples buying together, that’s a combined $70,000 that you can use toward your down payment
Note: The Canada.ca website shows a $60,000 limit, but this refers to a different program. The HBP withdrawal limit remains at $35,000 per person as of October 2025.
Who Qualifies for the Home Buyers’ Plan?
To use the HBP, you’ll need to meet these eligibility requirements:
- First-time home buyer status: You haven’t owned a home in the past four years (excluding the 30 days before your RRSP withdrawal)
- Qualifying home: Your home must be in Canada and serve as your primary residence within one year of purchase/construction
- Written agreement: You need a signed agreement to purchase or build a qualifying home
- RRSP funds must be “seasoned”: The money must have been in your RRSP for at least 90 days before withdrawal
Can You Use the HBP If You’re Not a First-Time Buyer?
Traditionally, the HBP was exclusively for first-time homebuyers. However, recent changes have made the program more accessible. You may qualify to use the HBP again if:
- You’re relocating for work and need to buy a new home
- You’ve experienced the death of a spouse or gotten divorced
- You’re buying a home to help an elderly relative (parent, grandparent, or immediate family member)
The Benefits of Using Your RRSP to Buy a House
There are several advantages to using the HBP for your home purchase:
- Tax-free withdrawal: Unlike regular RRSP withdrawals, HBP withdrawals aren’t taxed (as long as you repay according to schedule)
- Reduced down payment burden: Using your RRSP savings can help you reach the minimum down payment threshold faster
- Potential to avoid CMHC insurance: If the withdrawal helps you reach a 20% down payment, you could avoid mortgage default insurance premiums
- Potential tax deduction: Contributing to your RRSP before using the HBP may provide tax benefits
The Smart Strategy: RRSP Contribution Before HBP Withdrawal
Here’s a clever approach that many Canadians use:
You have $35,000 saved for a down payment and “contribution room” left in your RRSP. You could:
- Transfer your savings into your RRSP (at least 90 days before your home purchase closing date)
- Withdraw the money through the HBP
- Deduct the $35,000 RRSP contribution from your taxes that year
- Use your tax refund to help with other home purchase costs or to start your repayment
This strategy essentially gives you an interest-free loan from the government in the form of a tax refund. Pretty smart, huh?
Understanding the RRSP Repayment Process
When you withdraw money under the HBP, you’re essentially borrowing from your future retirement. Here’s what you need to know about repaying:
- You have 15 years to repay the full amount to your RRSP
- Your minimum annual repayment is 1/15th of the total amount withdrawn
- Repayments start in the second year after your withdrawal
- If you don’t make the minimum repayment in any given year, that amount will be added to your taxable income for that year
For example, if you withdrew the maximum $35,000:
- Your minimum annual repayment would be $2,333.33 (about $194.44 per month)
- Setting up automatic contributions to your RRSP is a great way to ensure you don’t miss repayments
Potential Drawbacks of Using the HBP
While the HBP offers significant benefits, there are some considerations to keep in mind:
- Opportunity cost: Money withdrawn from your RRSP won’t be growing tax-sheltered during the withdrawal period
- Impact on retirement savings: Using a large portion of your RRSP could affect your long-term retirement goals
- Repayment obligation: You’ll need to budget for RRSP repayments alongside your new mortgage payments
- Tax implications if not repaid: Failing to repay on schedule results in that year’s amount being added to your taxable income
Step-by-Step Guide to Using Your RRSP to Buy a Home
- Confirm your eligibility: Ensure you qualify as a first-time homebuyer (or under the exceptions)
- Check your RRSP balance: Determine how much you can withdraw (up to $35,000)
- Complete Form T1036: Fill out the “Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP”
- Submit the form to your financial institution: They’ll process your withdrawal without tax withholding
- Use the funds for your home purchase: The money must go toward buying or building your qualifying home
- Track your repayment schedule: Begin repayments in the second year after withdrawal
- Report repayments on your tax return: Use Schedule 7 when filing your annual income tax return
Real-World Example: Using the HBP to Your Advantage
Let me share a scenario that might help illustrate how this works:
Sarah has $30,000 saved for a down payment on a $400,000 condo. She also has $40,000 of unused RRSP contribution room. Instead of just using her $30,000 as a down payment, she:
- Contributes the $30,000 to her RRSP (3 months before her planned home purchase)
- Receives a tax refund of approximately $9,000 (assuming a 30% marginal tax rate)
- Withdraws $30,000 tax-free under the HBP for her down payment
- Uses the $9,000 tax refund to cover closing costs and moving expenses
Result: Sarah gets the same $30,000 down payment PLUS $9,000 extra to help with other homebuying expenses. Pretty sweet deal!
Frequently Asked Questions About Using RRSP for Home Purchase
Can I use my RRSP to buy a second home? A: Usually not, unless you meet one of the exceptions, such as having to move for work, losing a spouse or going through a divorce, or helping an elderly relative.
Q: What if I deposited money into my RRSP just 30 days ago?
A: You’ll need to wait until it’s been in the RRSP for at least 90 days before withdrawing under the HBP.
Q: Can I withdraw from multiple RRSP accounts?
A: Yes, you can withdraw from multiple RRSPs as long as the total doesn’t exceed your $35,000 limit.
Q: What happens if I don’t buy a house after withdrawing the money?
A: You can either return the funds to your RRSP within the same calendar year to avoid tax implications or include the withdrawal as income on your tax return.
Q: Can I use both the HBP and the First Home Savings Account (FHSA)?
A: Yes! According to the Canada Revenue Agency, you can withdraw amounts from your RRSP under the HBP and make a qualifying withdrawal from your FHSA for the same qualifying home, as long as you meet all conditions at the time of each withdrawal.
Is Using Your RRSP to Buy a House Right for You?
The Home Buyers’ Plan can be an excellent tool for many Canadians, but it’s not the perfect solution for everyone. Before making this decision, consider:
- Your current retirement savings progress
- Your ability to repay the withdrawn amount while also managing new homeowner expenses
- Other down payment sources available to you
- Your long-term financial goals
If you’re unsure, it’s always a good idea to consult with a financial advisor who can analyze your specific situation and help you determine whether the HBP makes sense for your circumstances.
Final Thoughts
Using your RRSP to buy a house through the Home Buyers’ Plan can be a smart financial move that helps you achieve homeownership sooner while potentially providing some tax advantages. However, it’s important to understand the full implications of this decision on your long-term retirement plans.
As with any major financial decision, knowledge is power. Now that you’re armed with the facts about using your RRSP to buy a house, you can confidently decide whether this strategy aligns with your homeownership goals and overall financial plan.
Have you used or considered using your RRSP to buy a house? I’d love to hear about your experience in the comments below!
How To Invest In Real Estate
Most Canadians choose to put their money into an RRSP or TFSA because they have special tax rules and let them invest in a variety of things. This is because they allow them to grow their savings over time, whether they’re saving for retirement, their kids, big purchases, or a “rainy day” fund. When it comes to investing their savings, many people choose the easiest route and only put their money into the stocks and mutual funds that their bank advisor suggests. Although these standardized portfolios are decent places for early investors to start, they are generic—not personalized to your specific financial situation—and may not offer the performance, level of control, or range of asset classes to maximize your returns.
With the Canadian real estate market constantly evolving, and home prices expected to rise another 10.5 per cent in 2022, it’s an excellent idea to leverage your savings to invest in real estate. Let’s look at how you can do that directly through your existing RRSP(s) and TFSA.
Average Contributions For Registered Funds
RRSP/TFSA Strategy: Limitations And Opportunities
When you first think about investing in real estate, you might picture putting your RRSP or TFSA savings straight toward a new mortgage on a rental property. However, there are a few reasons why this is not only inadvisable, but impossible:
- You can’t use an RRSP or any other registered funds to directly buy a home or rental property. The Home Buyer’s Plan for first-time home buyers is the only plan that lets you use your RRSP to buy a home to live in.
- There are much better ways to invest your money than putting all of your savings into a down payment and a mortgage if your goal is long-term growth rather than owning a home to live in.
- Investing in real estate through a third party is safer, easier, and easier to handle than becoming a landlord yourself.
Can I invest my RRSP, RESP or TFSA with Equiton?
Since the savings in your RRSPs and TFSA are usually tax exempt while the funds remain in those plans, that money can’t be used for just anything. A second rental property is considered a prohibited investment, so it’s not an option in this situation.
That doesn’t mean you can’t invest in real estate; from both a logistical and financial standpoint, your best avenue is to invest indirectly.
Contact Equiton to learn how you can use your RRSP & TFSA to invest in real estate
There are a few methods of indirectly investing in real estate, so it’s important to carefully consider which option is right for you:
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Mortgage Investment Corporations (MICs):
- These special groups of money invest in private mortgages and are responsible for most of the private mortgages issued in Canada. They’ve become more popular in recent years because they promise high returns, but because they focus mostly on mortgage lending, they come with a lot of risk.
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Public Real Estate Investment Trusts (REITs):
- REITs are like mutual funds, but for real estate. They pool together a wide range of different real estate holdings. Several hundred REITs are listed on the U.S. Stock Exchange (USX), and about 35 are listed on the Toronto Stock Exchange (TSX). S. or global stock exchanges. They are often chosen by real estate investors because of this, but they are very sensitive to the ups and downs of the stock market, which can be good or bad.
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Private Real Estate Investment Trusts (REITs):
- Private REITs, like their publicly traded counterparts, are becoming more and more popular as a way for investors to make money in real estate without taking on the risk of buying property themselves. Potential investors can put their money directly into private REITs through limited partnerships or mutual fund trusts instead of going through the stock exchange. Private REIT units are usually more stable in their value because they are not tied to the public market. They are also less affected by systematic and emotional volatility.
These investing avenues are not taxed like regular corporations, making them generally tax-efficient, particularly when paired with an RRSP or TFSA. Each option has its pros and cons, but for most investors, REITs are the recommended way to indirectly invest in RRSP and real estate.
As mentioned above, a popular option is to invest in publicly traded REITs. These are a fine enough option, although since they’re intrinsically correlated to the stock market, they will rise and fall with other major investments. For this reason, many public REITs may not provide the impact or level of diversification that an investor is seeking from a real estate investment. If exploring this avenue, consider all of your options and ensure you pick a proven REIT that you’re comfortable with.
If liquidity is less of a concern and you’re seeking more consistent long-term gains, exploring private REITs may be ideal. These avoid the costs of listing on a stock exchange and tend to pay higher dividends. When investing through an RRSP or TFSA, private REITs are typically offered to qualified investors via a mutual fund trust or a limited partnership (LP), through an offering memorandum (OM). Be sure to do your due diligence to read and understand the OM, and choose a private REIT that offers transparency, integrity, and a solid long-term strategy.
Due to the unique way REITs are taxed, holding a private REIT investment in a registered tax-free account (such as an RRSP, TFSA, or even an RESP) is a strong option, offering you a diversified portfolio and growth over time without any complicated accounting or taxation concerns.
Learn more about REITs or investing with Equiton