Home Buyer’s Plan
The federal Home Buyers Plan is an effective instrument of housing finance, originally promoted by REALTORS through CREA (Canadian Real Estate Association) as a way the government could support home ownership. Since the federal Home Buyers Plan was created in 1992, more than half a million homes have been purchased by first time home buyers using their RRSP investments.
The temporary, or “test” plan introduced in the federal budget in 1992 allowed the use of RRSP funds for any home buyer in Canada. A change in 1994 restricted the RRSP withdrawal option only to first-time home buyers.
Under terms of the plan, participants in a home buying agreement can borrow up to $20,000 from their RRSP to use in the purchase. Because there are usually two participants involved in the purchase of each home, there is a maximum of $40,000 available from individual RRSP’s that can be used in the down payment. Individuals have 15 years to repay the RRSP withdrawal without penalty. To date, some $2.8 billion has been repaid to RRSP accounts.
In 2002, more than 113,000 Canadians borrowed more than $1.2 billion from their personal RRSPs to use in the purchase of their first home. Since the Home Buyer Program was introduced in 1992, over 1.3 million Canadians have bought a combined total of 662,832 homes by borrowing $13.4 billion from their RRSPs.
According to a study done for The Canadian Real Estate Board economists, the economic spin off benefits of those 662,832 first-time home purchases was estimated almost $12.1 million.