However, there are some differences between an HBP RRSP withdrawal and an FHSA withdrawal that may give the FHSA a slight advantage when planning to buy a home.
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Making an FHSA withdrawal
First, if you don’t use an FHSA, you lose out. Unlike RRSP contribution room, FHSA contribution room does not carry forward once you have purchased a home. You can requalify for an FHSA as a first-time home buyer if you do not own a home for at least four years, but if you become a home owner and stay a home owner the rest of your life, you may lose the only opportunity to use the account.
Second, once you take a withdrawal from your FHSA, that’s the end of the story. There’s no repayment requirement.
Making a Home Buyers’ Plan withdrawal
HBP withdrawals from your RRSP, however, have strings attached. You need to repay 1/15th of the withdrawal every year for 15 years. Repayments generally start two years after the withdrawal, but there’s temporary relief for withdrawals before December 31, 2025, that allows repayments to begin in the fifth year after the withdrawal.
If you don’t repay the required amount in a given year, any shortfall is added to your income in that year. So, unlike an actual loan, you aren’t required to repay the full amount withdrawn through the HBP. But you do pay tax on any unpaid amount that’s come due, and you lose the ability to recontribute that sum to your RRSP forever.
Combine FHSA and HBP withdrawals
When you take a withdrawal from your FHSA or from your RRSP using the HBP, you do not need to use every penny for your down payment. Practically speaking, most home buyers will use the withdrawals directly or indirectly for their down payment, but technically the only requirement is buying an eligible home.
So, in your case, Ryan, you could certainly hold back funds to use for a renovation.
When you take am eligible withdrawal from your FHSA or from your RRSP using the HBP, you do not need to use the withdrawal specifically for your down payment. Practically speaking, most home buyers will use the withdrawals directly or indirectly for their down payment, but technically the only requirement to take a withdrawal is that you are buying an eligible home.
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