Home Buyers’ Plan (HBP) – Explained

Hi everyone! In today’s video we’re going
learn all about the Home Buyers’ Plan. This channel is all about
making personal finance easy so we can be more confident and independent with
our money. If that sounds like something that you’re interested in, hit the
subscribe button and let’s get started on today’s topic. So what exactly is the
Home Buyers’ Plan? Well it’s a program that allows us to take money out of our RSP
tax-free to use towards a down payment of our first home. There are limits
however as to how much we can withdraw from our RSP tax-free so let’s take a closer
look. As of 2019, you can withdraw up to $25,000 tax-free
from your RSP account and there’s actually a proposal in place to increase
that amount to $35,000. later this year. Afterwards,
you’ll be required to pay your RSP back over a 15 year period with your first
payment starting two years after you made the withdrawal. So as an example, if
you did take out $25,000 in 2019, then two years later in
2021 you’re going to start your first payment of just under $1,700
per year for 15 years. Not everyone however is allowed to withdraw
money tax free from their RSP under this program, you need to be eligible and one
of the conditions is you need to be considered a “first-time home buyer”.
Now if you’re a person with a disability or you want to withdraw money from your
RSP to help a relative with a disability, that you don’t need to meet this
first-time homebuyer criteria. In order to qualify as a first-time home buyer,
that would mean that you couldn’t have lived in a house this year or any of the
four past calendar years that either you or your spouse owned. So as an example,
let’s say you wanted to withdraw money under this program from your RSP on June
1st of this year, then to qualify as a first-time home buyer, you wouldn’t have
lived in a house that you or your spouse owned at any time between January 1st
and May 31st of this year plus any time during the years of 2015 to 2018. The
second condition is that there must be a written agreement in place to either buy
or build your new home. And the third condition, is that you must occupy the
home within a year of buying it and it must be considered your principal
residence. What happens though if when you’re we’re not able to make that
repayment to your RSP account? Any payments you miss will be added to your
taxable income for that year. If you’re only able to make a partial payment
instead of the full payment to your RSP account, then the difference between the
required payment and what you actually paid will be added to your taxable
income for that year. Then, all of your remaining payments for the rest of
the 15 years will still remain the same. There may be a situation where you might
actually elect to pay more than you have to in a given year. If you do do that,
then it will reduce your total balance owing and reduce your annual payments
for the remainder of years left. This wraps up our video on the Home
Buyers’ Plan. If you have questions, feel free to comment below and if you liked
the video please give me a thumbs up. And don’t forget, hit that subscribe and bell
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