The already high (and seemingly ever-rising) costs of real estate and education means buying a home and pursuing higher education are two of the biggest expenses people can face.

While planning for such expenditures can feel daunting, there are two (often overlooked) Government of Canada programs that can help you achieve those milestones sooner: the Home Buyers’ Plan (HBP) and the Lifelong Learning Plan (LLP). Both programs allow participants to tap into the potential of their registered retirement savings plans (RRSPs) well before they retire.

Home Buyers’ Plan

The Home Buyers’ Plan—the more well-known of the two programs—allows eligible participants to borrow up to $60,000 from their RRSP to put toward a home purchase in Canada¹ and for eligible couples to borrow up to $120,000 in total. Normally a withdrawal from your RRSP has to be included as part of your income, so this program allows access to RRSP funds without the tax hit.

Note: The RRSP funds withdrawn must be on deposit for at least 90 days before withdrawing under the HBP.

HBP Qualifications

To participate in this program, you must:

• be a resident of Canada,
• be a first-time home buyer, and
• have a written agreement to buy or build a home either for yourself or for a related person with a disability.

To qualify as a first-time home buyer, you cannot:

• own a home during the current year of withdrawal, or
• have owned a home in the four calendar years prior to the year of withdrawal, or
• occupy a home that your current spouse or common-law partner owned/jointly owned during that same period.

It’s possible to have previously owned a home and qualify as a first-time home buyer again as well as use the HBP more than once, so long as sufficient time has passed since you last owned a home and any previous HBP withdrawal balance has been repaid before the current year.

Long-Term Repayment Horizon

While repayment begins in the second year after the first HBP withdrawal was made, participants in the HBP have 15 years to pay back the funds they borrowed.

Anyone making their first withdrawal between January 1, 2022, and December 31, 2025, is temporarily able to defer the start of this repayment period by an additional three years—i.e., they would have five years before repayment must begin.

Annual minimum repayments are divided evenly over the 15-year repayment period. When you file your annual tax return, you will indicate the amount of RRSP contributions designated as repayment under the HBP. If you are unable to repay the minimum amount in any given year, that amount becomes taxable income for that year. You may accelerate the repayment to your RRSP at any time.

Your Notice of Assessment will include a statement of account for the HBP with details such as your repayment amounts (noted as income) and what repayments are required for the following year. 

Lifelong Learning Plan

The Lifelong Learning Plan is another program that allows you to borrow from your RRSP. The program allows eligible people to borrow up to $20,000 from their RRSPs to fund full-time academic pursuits.²

To participate in this program, you must be:

• a Canadian resident, and
• you or your spouse/common-law partner are enrolled in a qualifying educational program at an approved educational institution.

You can borrow up to $10,000 a year from your RRSP up to a maximum of $20,000 over four years. Participants have 10 years to pay back the funds, generally starting in the second year after the last withdrawal.

When to consider using an LLP

The LLP is often an attractive option for people who have been in the workforce for a while, have accumulated a fair amount in their RRSPs, and want to return to school, either to upgrade their education or pursue a new career.

Rather than taking out a substantial loan to pay for a new degree, having the ability to withdraw from your RRSP to help finance it can be beneficial.

Borrowing from your RRSP: Important Considerations

While both the Home Buyers’ Plan and the Lifelong Learning Plan can be very attractive solutions in the pursuit of home ownership and funding higher education, it’s important to keep in mind that by borrowing from your RRSP, you risk giving up tax-sheltered growth for your savings by recontributing your payments over 10 to 15 years rather than keeping those funds invested and growing over that same time frame.

Also, it’s a debt—interest-free debt—but still, a debt owed to the RRSP. When times comes for repayment, it might be worth considering how current interest rate levels—in addition to your comfort levels with moving money in and out of the markets—might adjust your approach.

If you are considering taking advantage of the Home Buyers’ Plan or Lifelong Learning Plan, it’s worth speaking with your investment counsellor or trusted advisor who fully understands your financial situation and can give you advice on the range of potential impacts.