[Woodbridge_Heights]

Hi all you real estate gurus, I have a question with respect to withdrawing funds from my RRSP under the first time home buyer plan and subsequently using the property as an income generator (i.e. rental).

Logically one would think that this would not be allowed, as the HBP is intended for those that are buying a house that they will live in, however I can't find any documentation that would indicate such a restriction. So far the only thing I have found is that you must intend to occupy (and thus move into) the property in question at some point 12 months from the date of the withdrawal of funds. However there is no minimum time that you must be occupying said property.

So could I, let's say, buy the property move in for a few months or so and then "decide" to rent it out and move into some other residence? Aside from the hassle of changing addresses twice is there any mechanism by the government to prevent this kind of action?

 

[Dan_550]

I've been looking into this through my investment banker and was provided with a great summary document - I've copied the 'Conditions of Participation' below:

To participate in the HBP, you must be a first-time homebuyer. You are not considered a first-time homebuyer if at any time in the four previous calendar years — beginning January 1 (e.g. January 1, 2005, for 2009 HBP withdrawals) and ending 31 days before your RSP withdrawal — you owned a home that you occupied as your principal place of residence. If you own a home with your spouse, it is possible that only one of you will be considered a first-time homebuyer.
There is an exception to the first-time homebuyer rule if you are disabled, you are buying or building a home for a related disabled person, or you are helping such a person buy or build a home. If you fall into this category, the home must be better suited to the needs of the disabled person or more accessible than his or her current home.
In addition to being a first-time homebuyer, to be eligible for the HBP, you must satisfy all of these conditions:
• You must enter into a written agreement (“offer of purchaseâ€) to buy or build a qualifying home.
• You have to intend to occupy the qualifying home as your principal place of residence no later than one year after buying or building it. However, once you occupy the home, there is no minimum period of time that you have to live there.
• If you have previously participated in the HBP, your repayable HBP balance on January 1 of the year of the new withdrawal has to be zero.
• Neither you nor your spouse or common-law partner can own the qualifying home more than 30 days before the RSP withdrawal.
• You must be a resident of Canada from the time you receive the funds up to the time the qualifying home is bought or built.
• If you have withdrawn funds under the HBP this year, you will have to buy or build your qualifying home before October 1 of next year. If you are building a qualifying home, it is considered built on the date it becomes habitable. There are many exceptions to this condition if you do not meet the deadline. Please refer to Canada Revenue Agency’s publication RC4135 — Home Buyers’ Plan for more information.

Hope this helps.

 

[UrbanVigor]

I'm no guru, but I recall a friend who is mention something about living in it for a set number of months so that it would not be considered an income property. However, I've always wondered what would happen if someone lived in a home for only a couple of months and had to sell out of necessity.

Edit: Dan's bolded quote above certainly spells it out loud and clear.

 

[UrbanVigor]

How does this work if purchasing a pre-construction?

Are you able to withdraw at the time of signing?

Later when you need the funds to put against the deposit after already making deposits using non-RRSP funds?

Or do you have to wait until final closing?

 

[bikegirl]

How does this work if purchasing a pre-construction?

Are you able to withdraw at the time of signing?

Later when you need the funds to put against the deposit after already making deposits using non-RRSP funds?

Or do you have to wait until final closing?

Glad you asked these questions. I am interested in the answers as well.

 

[KA1]

Ka1

Glad you asked these questions. I am interested in the answers as well.

go to tax department's web site www.cra.gc.ca

on the next screen, click English, on the next screen, click on Forms and Publications, on the next screen, in the space provided type RC 4135.
next click on Home Buyers Plan. You can view and download this PDF publication. It has all the answers that you had wanted.