1) You must be considered a first time buyer.  The definition of a first time buyer is one who has
not owned his/her own residence for the last 5 years.  You may use the HBP more than one time,
provided there is no outstanding balance owing under the last one.

2) You must use the funds in the year of the withdrawal.  The funds must be in a vehicle that
will allow such a withdrawal (check with your RRSP trustee).

3) You must repay your RRSP at the rate of 1/15th the amount borrowed per year over the next
15 years.  The first payment though is two years after your acquisition through the HBP.

4) You must be a resident of Canada.

5) The funds must be used to purchase a residence, or pay for improvements in your new
residence, or help defray the costs of acquiring a new residence.  The definition of a residence is
a housing unit on Canadian soil.  The housing unit could be a single family house, a semi-
detached, a town home, a mobile home, a condominium unit, part of a duplex, triplex or
fourplex, part of an apartment building.  Both new and existing units qualify.

6) The RRSP funds for this purpose are limited to $20,000 per qualifying person.  A couple may
withdraw $40,000.

The repayment to your RRSP must occur before December 31 each year, and any amount not
repaid will increase your taxable income by the amount of the shortfall.  In other words, if your
repayment called for $1333.33 per year (that’s 1/15th of $20,000), and you could only pay back
$1000 in the year 2004, the difference ($333.33) would be added to your taxable income that
year.

There are some schemes that will promote 100% financing using the RRSP funds.  If you have
the funds already, there is no problem in utilizing them.  If you do not have the funds already,
some promoters may want you to borrow enough money to buy whatever amount of RRSP you
are entitled to (the amount will show on your last Revenue Canada Assessment Notice).  This
will create a rather large tax refund, in most cases.  These promoters will then tell you to cancel
your RRSP loan after 91 days.  Your tax refund will allow you to attain your minimum 5% down
payment, and you no longer have the payment on the loan. You still must repay your RRSP the
amount that you had borrowed over the next 15 years.  Here the catch to the plan, you must
now have an asset equivalent to the tax refund or else you cannot use the refund for down
payment purposes.  Apart from the 5% down payment, you must also show that you have 1.5%
of the purchase price in reserve for closing costs, such as legal fees, land transfer tax, etc.  As an
added tidbit, until you repay the 1/15th portion each year, you cannot purchase new RRSPs.

Borrowing from your RRSP under the HBP constitutes borrowing at zero percent. While it looks
like a good idea on the surface, one must remember that the RRSP is no longer earning tax free
income.  If the HBP is the only way to acquire the home, or if the borrowed amount from your
RRSP will avoid the high ratio surcharge (CMHC premium), I feel it is still a good idea to
participate.  If one can muster enough down payment without dipping into RRSP funds, and the
RRSP funds themselves are in a vehicle that earns sufficient returns, I would elect not to
participate in the HBP.