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I am a first time home buyer and am thinking of making use of the HBP (Home Buyer's Plan). I have $35,000 in RRSP contribution limit. I am planning to deposit $25,000 into my RRSP account and $10,000 into the RRSP account of my spouse (spousal RRSP). I want to be able to withdraw $35,000 through the HBP plan. However my employer also makes upto 4% in matching contribution to my RRSP with every paycheque.

My question is that if I make the $35,000 deposit into the RRSP, I would have exhausted my contribution limit for the current year. If after this I contribute 4% of my paycheque every month into my RRSP along with a matching 4% from my employer, I will be exceeding my contribution limit for this year. Can I show this amount as a repayment for the HBP loan I took in this same year?

If the above option is not possible then I will be left with two options:-
1) Deposit less money into my RRSP account to begin-with so that the monthly contributions don't exceed my contribution limit. In this case I will only be able to make use of an amount which is less than my RRSP contribution limit.
2) Stop the 4% contribution as soon as I deposit the $35,000. In this case I will be loosing out on the 4% free money from the employer!

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You will be able to use the subsequent 4% matching contributions as repayments toward the HBP in the same tax year. You can designate it as such when you do your tax return for the year. Note that the first payment for HBP will be in the second year after you withdraw from your RRSP, but you are free to designate any contributions before this time toward the HBP repayment.

One blog post indicates that if you pay more than the minimum amount in any year (including pre-payments prior to the first required payment), "future payments will be the remaining amount owing divided by the number of payment years remaining." My experience with my LLP repayment (similar to HBP) is the same.

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  • Thank-you so much for your answer. Just a follow on question. Will these early contributions towards the HBP lower the total loan amount? Therefore when I actually start paying the HBP loan from the second year, the minimum amount will be 1/15th of the amount left?
    – Konoha
    Commented Apr 7, 2015 at 3:26
  • I believe that it will be 1/15th of the amount left, but I only have anecdotal evidence of that. If I find anything definitive, I'll update my answer.
    – fideli
    Commented Apr 7, 2015 at 13:56
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    @Konoha: I updated my answer to reflect this. Best of luck!
    – fideli
    Commented Apr 9, 2015 at 16:36

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