Repaying your First Time Home Buyer plan!
So you borrowed from your RRSP account to utilize the governments First Time Home Buyers Plan (HBP). Now you have to repay that borrowed sum to your RRSP account within the next 15 years. So how do you do that, and what happens if you miss one of those repayments?
The repayment process
For the HBP program can be confusing to people, so let me try to simplify it. The repayment amount (the amount you borrowed) is divided over a 15 year period, each year you have to choose whether to repay that minimum annual amount or not.
If you don’t repay the amount that is expected, the government will then treat that amount as a part of your income and thus tax you on it (which could potentially change your tax bracket).
The next year you again need to make the decision to repay that minimum annual amount, and so on, and so on. Regardless of whether you choose to repay in a year or not, the final amount owed does not change, nor does the due date of the full amount.
If you choose not to repay the amount
You will have been taxed just like if you never used the HBP program in the first place and simply took the money out of your RRSP.
To find the balance remaining on your HBP repayment schedule, check your Notice of Assessment (NOA) received post filing your taxes with the Canada Revenue Agency (CRA) each year.
If you have any questions, please feel free to contact me any time.