Ask an Expert: What’s The Deal with the RRSP First Home Buyer’s Program?

At Avi Urban, we work with the experts to help you make the best decisions when buying your new townhome or apartment with us. One of these experts is Laura Parsons, Bank of Montreal Manger of Mortgage Specialists and Calgary Sun Columnist.

After speaking with customers and friends, there is still confusion about the government’s RRSP First Home Buyer’s Program.

What is the First Home Buyer’s Program? It’s a program that allows first-time home buyers to withdraw a maximum of $25,000 from their RRSP in order to fund their downpayment. This means by using this program, you’ll have a house and a sizable RRSP, plus cash in the form of a tax credit from the government.

Here are some key things you need to know about the First Home Buyer’s Program:

1.   Contribute 90 days before: In order to use your RRSP funds, you have to contribute to your RRSP at least 90 days before you intend to use them for your downpayment. If you already have your downpayment in order, it’s easy to put it in an RRSP for 90 days, then take it out when your downpayment is required. Simple!

2.   Pay back within 15 years: Your RRSP’s must be paid back in full within 15 years of withdrawl. You have a two year grace period before you start paying it back. So, if you withdrew the full $25,000, then you would need to repay approximately $1,670 per year. Let’s say after the two year grace period you only repay $1,000 during the third year. The remaining $670 would become taxable income, which could mean you might owe the government some income tax.

3.   No RRSP? Get a loan now and a tax refund later: First, find out how much RRSP contribution room you have (this can be found on the Canada Revenue Agency’s website or at the bottom of your tax assessment). Once you have that, you can take out a loan, such as BMO RRSP ReadiLine, and use the funds to contribute to your RRSP. The loan can then be repaid and you will receive a tax credit for the RRSP contribution, which can be used to build your downpayment or help repay the loan.

4.   Haven’t owned in five years: You’re only eligible for this program if you haven’t owned a home in the past five years.

It’s a good idea to ensure that you’ll have the amount you withdrew from your RRSP within 15 years. Speak to your tax advisor to get more information about the tax implications of contributing to your RRSP and withdrawing RRSP money under the First Home Buyers Program.

If you have any questions you can email me or speak with a Mortgage Specialist to discuss your strategy.

Laura Parsons is an area manager of mortgage specialists at BMO Bank of Montreal. You can reach her at

Let us know – will you be taking advantage of this government program when buying your first place?