Question on Home Buyer Purchase Plan (HBP) Withdrawal

I have recently purchased a house and just want to make sure I interpret the HBP withdrawal guideline correctly.

For my house, the contract was signed on Sep 2010, with expected closing date in Oct 2011 (but probably would delay to early 2012). When's the earliest and latest time I could do my RRSP withdraw ? Does the closing date matter ?

Please advise. 


 In order to get correct information and answers to this and other questions related to HBP, please follow this link http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html and from the guide http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html


In order to keep things simple;

Generally all the HBP withdrawal should be done in the same year. However, CRA would also consider any withdrawal done in January of next year to be done in the earlier year if all other conditions of HBP are satisfied.

So, if you have not done any HBP withdrawal so far, you should be doing all the withdrawals in 2011 or the last withdrawal should be done no later than January, 2012.

The closing date does matter. If you are doing HBP withdrawal in 2011 then the qualifying home should be ready for possession before Oct 1, 2012. So, you should be fine if you do all your HBP withdrawals in 2011 or the last withdrawal latest by January, 2012.

One more question though, what if the closing date is delay due to the builder and being pushed to Mar 2012? Will I get into trouble if I made my withdraw in Jan 2011 in this case ?  

You would be fine if you have a vaild purchase contract with the builder (dealing at non arms length) at the time of the RRSP withdrawal and the delay is on part of the builder because of unforeseen circumstances.

The guide has answers to all the questions. Here is the relevant portion:

Extensions for buying or building a qualifying home or replacement property

If you do not buy or build the qualifying home you indicated on Form T1036 (or a replacement property) before October 1 of the year following the year of the withdrawal, we still consider you to have met the deadline if either of the following situations applies to you:

You had a written agreement, in effect on October 1 of the year following the year of the withdrawal, to buy a qualifying home or replacement property, and you buy the property before October 1 of the second year following the year of the withdrawal. In addition, you have to be a Canadian resident up to the time of purchase (see Example 1).

You had paid an amount after the date of the first withdrawal and before October 1 of the following year to the contractors or suppliers (with whom you deal at arm’s length) for materials for the home being built, or towards its construction, that was at least equal to the total of all withdrawals under the HBP (see Example 2).

Example 1

On February 10, 2008, Steven, a Canadian resident, entered into an agreement to buy a duplex, the ground floor of which he intends to occupy as his principal place of residence. Because of an existing lease, the possession date is May 4, 2010. On February 20, 2008, Steven withdrew $15,000 from his RRSPs under the HBP. On May 4, 2010, he takes possession of the duplex and moves in.

Since Steven withdrew his funds in 2008, he had to buy the home before October 1, 2009. Although Steven took possession of the home after this deadline, we consider him to have bought the home by the deadline because he had an agreement in effect on October 1, 2009, he bought the home before October 1, 2010, and he was a Canadian resident when he bought it.

Example 2

In January 2009, Clara withdrew $10,000 from her RRSPs under the HBP. Earlier in the same month, she had finalized a contract to have her home built. She paid $7,000 when construction started in April 2009, and $6,000 more in August 2010, for a total of $13,000. Clara dealt at arm’s length with the contractor.

Construction of the home is not completed until December 15, 2010, because the building materials arrived late.

Since Clara withdrew her funds in 2009, she has to have the home built before October 1, 2010.

Although construction of the home is not completed until December 15, 2010, we consider Clara’s home to have been built by the deadline because the $13,000 she paid towards its construction before this deadline is more than the total amount of her withdrawals ($10,000), and because she dealt at arm’s length with the contractor