How to Withdraw from Your RRSP For a Down Payment (as a First Time Buyer)
Tim Lyon • May 29, 2025
Buying your first home is exciting—but figuring out how to pull money from your RRSP for a down payment can feel confusing. The Home Buyers’ Plan (HBP) lets you use your retirement savings without tax penalties, but the withdrawal rules are specific.
Here’s a simple breakdown so you know exactly what to do and don’t miss a step.
What Is the Home Buyers’ Plan (HBP)?
The HBP is a federal program that allows eligible Canadians to use up to $60,000 from their RRSP for the purchase or construction of a qualifying home.
- Each individual can withdraw up to $60,000.
- Couples can each participate, meaning up to $120,000 may be available for a down payment.
How the Withdrawal Works
- Step 1: Check Your Eligibility
- You must be a first-time homebuyer (or qualify under the rules for a specified disabled person).
- You must have a written agreement to buy or build a qualifying home.
- You must be a resident of Canada when you withdraw the funds.
- Step 2: Fill Out the Form
- Use Form T1036 – Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP.
- Download it here: Form T1036 (CRA).
- If you’re withdrawing from multiple RRSP accounts, a separate form is needed for each one.
- Step 3: Submit the Form to Your Financial Institution
- Your RRSP provider will complete their part of the form and process the withdrawal.
- Step 4: Receive the Funds
- It can take up to 5 business days (sometimes longer) for the money to reach your account.
- Plan ahead — I always recommend starting the process early so the funds are available well before you need them.
Benefits
- Tax-free withdrawal (if you follow the repayment rules).
- Larger down payment without needing taxable withdrawals or additional loans.
- Flexible repayment over up to 15 years, interest-free.
Important Considerations
- Repayments are mandatory — each year (starting the second year after your withdrawal) you must repay at least 1/15 of the amount withdrawn. If you don’t, that portion will be added to your taxable income.
- 89-day rule — RRSP contributions must be on deposit for at least 89 days before you can withdraw them under the HBP.
- Plan your timing — since institutions may take several days to release funds, don’t wait until the last minute.
Next Steps
If you’re planning to use your RRSP for your first home:
- Confirm your eligibility.
- Download and complete Form T1036.
- Request your withdrawal early to avoid delays.
Need help with your mortgage? Book a consultation or call 778-988-8409.
Glossary
- Home Buyers’ Plan (HBP): A federal program that lets first-time buyers withdraw up to $60,000 from their RRSP tax-free for a home purchase.
- RRSP (Registered Retirement Savings Plan): A government-registered account that allows Canadians to save for retirement with tax advantages.
- Form T1036: The official CRA form required to withdraw RRSP funds under the HBP.
Tim Lyon
Mortgage Consultant
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If you are buying a home with a suite, keeping your current home as a rental, or already own a rental property, mortgage qualification can get confusing fast. The frustrating part is that you can do everything “right” and still get very different answers depending on which lender you talk to. Here’s a simple breakdown so you understand it and don’t miss out. What are Debt Service Ratios? In Canada, lenders qualify you using two main ratios: Gross Debt Service (GDS) This looks at housing costs only , typically: Mortgage payment Property taxes Heating 50% of strata fees (if applicable) GDS typically needs to be 39% or less of your gross income. Total Debt Service (TDS) This includes everything in GDS , plus other debts like: Car loans Credit cards Lines of credit Student loans TDS typically needs to be 44% or less of your gross income. These ratios are the foundation. If they do not work, the lender will not approve the mortgage, even with strong credit and a solid down payment. How Lenders Treat Rental Income Most people assume lenders look at rental properties based on simple cash flow (rent minus mortgage payment). In reality, most lenders use one of two methods: 1) Addback A percentage of the rental income is added to your gross income for qualification purposes. 2)Offset A percentage of the rental income is subtracted from the mortgage payment tied to the rental property. Different lenders use different percentages and different worksheets. That is why the same borrower can qualify with one lender and fail with another. Benefits of Understanding Lender Methods When you understand how rental income is calculated, you can: Avoid being under-qualified by a lender with conservative rules Get a more accurate picture of your real purchasing power Choose a lender that fits your situation (instead of forcing your situation to fit the lender) Important Considerations A few key points to keep in mind: Rental income is rarely counted at 100% , but some lenders are more generous than others. The method matters just as much as the percentage (addback vs offset). If you own multiple properties, lender worksheets can change the result dramatically. Your lender choice is a strategy decision , not just a rate decision. Real-World Example: Same Clients, Two Very Different Outcomes Here’s an example comparing lenders Scotiabank and Strive, using a fictitious couple: Scenario Household income: $160,000 Existing townhome: $800,000 value with a $525,000 mortgage ( $2,500/month payment) Market rent for the townhome: $3,400/month New purchase: property with a rental suite generating $1,800/month Down payment: 10% Other debts: student loan $165/month , car loan $500/month How Scotiabank viewed it For the townhome rental, they counted half the rent and subtracted the mortgage payment, leaving an $800/month shortfall that gets added into the debt ratios. For the new purchase, 50% of the suite income gets added to income. Max mortgage : $650,700 Max purchase price : $723,000 How Strive viewed it For the townhome rental, Strive used a rental worksheet and calculated $5.20/month of income that can be added to the application. For the new purchase, 100% of the suite income gets added to income, and they did not need to include taxes or heat. Max mortgage : $878,400 Max purchase price : $976,000 The result That’s a $253,000 difference in purchasing power , with the same clients, same income, same debts, and same properties. The difference was lender policy. Quick Summary GDS and TDS ratios are the backbone of mortgage qualification. Rental income is usually counted using Addback or Offset , and each lender handles this differently. Two lenders can produce wildly different results, even with the exact same file. In the example above, lender choice created a $253,000 swing in purchasing power. Next Steps If you are planning to: Buy a home with a suite Keep your current home and convert it to a rental Use rental income to qualify Reach out and I will run the numbers across multiple lenders so you see what you actually qualify for, not just what one lender will allow. Need help with your mortgage? Book a consultation or call 778-988-8409 . Glossary Addback : A method where a lender adds a percentage of rental income to your gross income for qualification. Gross Debt Service (GDS) : The ratio that measures housing costs as a percentage of gross income. Offset : A method where a lender subtracts a percentage of rental income from the rental property’s mortgage payment for qualification. Total Debt Service (TDS) : The ratio that measures housing costs plus other debts as a percentage of gross income.
