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are mandatory — each year (starting the second year after your withdrawal) you must repay at least 1/15 of the amount withdrawn.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
What Is a Second Mortgage, Really? (It’s Not What Most People Think) If you’ve heard the term “second mortgage” and assumed it refers to the next mortgage you take out after your first one ends, you’re not alone. It’s a common misconception—but the reality is a bit different. A second mortgage isn’t about the order of mortgages over time. It’s actually about the number of loans secured against a single property —at the same time. So, What Exactly Is a Second Mortgage? When you first buy a home, your mortgage is registered on the property in first position . This simply means your lender has the primary legal claim to your property if you ever sell it or default. A second mortgage is another loan that’s added on top of your existing mortgage. It’s registered in second position , meaning the lender only gets paid out after the first mortgage is settled. If you sell your home, any proceeds go toward paying off the first mortgage first, then the second one, and any remaining equity is yours. It’s important to note: You still keep your original mortgage and keep making payments on it —the second mortgage is an entirely separate agreement layered on top. Why Would Anyone Take Out a Second Mortgage? There are a few good reasons homeowners choose this route: You want to tap into your home equity without refinancing your existing mortgage. Your current mortgage has great terms (like a low interest rate), and breaking it would trigger hefty penalties. You need access to funds quickly , and a second mortgage is faster and more flexible than refinancing. One common use? Debt consolidation . If you’re juggling high-interest credit card or personal loan debt, a second mortgage can help reduce your overall interest costs and improve monthly cash flow. Is a Second Mortgage Right for You? A second mortgage can be a smart solution in the right situation—but it’s not always the best move. It depends on your current mortgage terms, your equity, and your financial goals. If you’re curious about how a second mortgage could work for your situation—or if you’re considering your options to improve cash flow or access equity—let’s talk. I’d be happy to walk you through it and help you explore the right path forward. Reach out anytime—we’ll figure it out together.
What affects mortgage rates? Does the Bank of Canada rate affect fixed-rate mortgages? These are questions that come up all the time, so in this this post, I’ll explain how fixed and variable rates are determined, why they don’t always move together, and what that means for you as a borrower. But to start with the short answer: While Bank of Canada announcements immediately impact variable rates, fixed rates usually have those expectations already baked in long before the announcement. That’s because fixed rates are forward-looking — they reflect where markets think rates are headed, not just where they are today. What Are Fixed and Variable Rates? Fixed Rate The interest rate stays the same for the entire mortgage term. Payments remain consistent, no matter what happens in the market. Variable Rate The interest rate changes during the mortgage term, moving up or down depending on the lender’s prime rate. Payments may stay the same (VRM) or change (ARM). How Do Fixed Rates Work? When you choose a fixed rate, the lender is guaranteeing your rate for the length of your term . To do this, they need to estimate what a fair rate will be over that time. This makes fixed rates more forward-looking — they often reflect not just today’s conditions, but also what the market expects to happen in the future. Key Points About Fixed Rates Strongly influenced by the Canadian bond market (especially the 5-year government bond yield). Lenders adjust their fixed rates based on investor expectations for inflation and future interest rates. Often, Bank of Canada moves are already baked into fixed rates before they happen. Example If bond yields suggest that rates will rise in the next year, lenders may increase fixed rates now, even if the Bank of Canada hasn’t made a move yet. How Do Variable Rates Work? Variable rates move directly with the Bank of Canada’s overnight rate. When the Bank of Canada raises or lowers its rate, lenders adjust their prime rate accordingly, and variable mortgages follow. For borrowers, the most important detail is the discount from prime , because that sets the actual rate you pay. For example, if prime is 4.95% and your mortgage is Prime – 0.5%, your rate is 4.45%. The discounts lenders offer change over time. In periods of economic uncertainty, lenders usually shrink the discount they offer, which can make new variable mortgages less attractive even if prime is coming down. Key Points About Variable Rates Directly tied to the Bank of Canada’s overnight rate, which is reviewed eight times a year. Banks adjust their prime rate in response to these moves. Your actual rate = Prime – discount (e.g., Prime – 0.5%). Example If prime is 4.95% and your mortgage is Prime – 0.5%, your rate is 4.45%. If the Bank of Canada cuts rates by 0.25%, prime drops to 4.70%, and your rate automatically drops to 4.20%. Why Don’t Fixed and Variable Always Move Together? Fixed rates reflect the bond market, which looks ahead at where rates and inflation may go. Variable rates respond directly to Bank of Canada decisions, reflecting current conditions. This is why fixed rates can fall while variable rates stay flat, or vice versa. Next Steps If you’re deciding between fixed and variable, understanding how each is set is the first step. The next is to match the right mortgage type to your budget and comfort with risk. If you’d like to review which option works best for you, I’d be happy to help. Need help with your mortgage? Book a consultation or call 778-988-8409 . Mortgage Term Glossary Amortization: The total length of time it will take to pay off your mortgage completely (typically 25–30 years in Canada). Bond Yield: The return investors get from government bonds. Used as a benchmark for fixed mortgage rates. Discount (Variable Rate): The amount subtracted from prime to determine your actual mortgage rate. Fixed Rate: An interest rate that stays the same for the entire mortgage term. Mortgage Term: The length of your mortgage contract with your lender (typically 1–5 years), after which you need to renew. Overnight Rate: The interest rate at which major banks borrow and lend money to each other, set by the Bank of Canada. Prime Rate: The interest rate banks use as a baseline for loans, influenced by the Bank of Canada’s overnight rate. Variable Rate: An interest rate that changes during your mortgage term based on lender prime rates.
