Is the Manzil mortgage eligible for the Home Buyers’ Plan?

Let’s get one thing straight — the Manzil halal mortgage program is eligible for the RRSP Home Buyer’s Plan (HBP)! Now that’s out of the way; are you thinking of putting a down payment on your halal dream home but don’t have enough savings? Well, the Canadian government is trying to help you out through the HBP which is a tax-free way to fund your down payment through your RRSP. Not many people are aware of this fantastic tool but don’t worry, we’re here to make sure you get all the information you need to access all the tools that will help you get into your halal dream home faster!

What is the Home Buyers’ Plan (HBP)?

In short, the Home Buyers’ Plan allows first-time home-buyers to take a tax-free loan from their Registered Retirement Savings Plan (RRSP) for a down payment on a qualifying home. As of March 19, 2019, the Canadian Federal government increased the HBP amount from $25,000 to $35,000.

If you’re planning on buying your halal dream home with someone who is also a first-time home buyer, you can each withdraw $35,000 from your RRSP for a total combined withdrawal of $70,000. All. Tax. Free.

This all sounds awesome, right? Just don’t forget the government considers this a loan from your RRSP and they’ve stipulated that you have 15 years to pay it all back. If you don’t make your minimum HBP repayment back into your RRSP, they will take the minimum annual amount (what you took out divided by 15 years) and add it to your taxable income and you will end up paying the tax on it instead. You should also know that HBP repayments are not eligible for tax deductions — although amazing if they were, it would be considered double dipping!

How do you qualify for the Home Buyers’ Plan?

To be eligible as a first-time home buyer and use your RRSP for the Home Buyers’ Plan you must meet the following criteria (you can see a more detailed list on the CRA website):

• You’re a Canadian resident (not necessarily a citizen)

• The funds held in your RRSP that you’re using for your HBP need to be in there for at least 90 days

• You have not owned (and lived in the home you owned) for the past 4 years

• If you’re purchasing with a spouse (including common law) who is not a first-time home-buyer, you cannot have lived in a house they owned for the past 4 years

• If you’ve participated in the HBP in the past (over 4 years ago) and you’re looking to do so again, the amount owing on your previous HBP account needs to be zero

How do I get my Home Buyers’ Plan money?

If you meet the above criteria and established that you’re eligible to use the HBP, you’ll have to fill out just one simple form. This form is called “Home Buyers’ Plan Request to Withdraw Funds from an RRSP” or Form T1036 for short.

Once you’ve filled out this form, you’ll need to give it to the institution that holds your RRSP. If that’s Manzil, send it to us and we’ll take care of it. Just make sure you submit this within 30 days (before or after) taking the title of your home. If you withdraw the funds outside of this 30-day window you will be considered ineligible and you’ll be taxed on the full amount.

Once your institution (hopefully Manzil) has processed this form, the money will be deposited directly into your bank account. Yes! You heard correctly, cash into your account means, not only can you use this as part of your down payment, but it can be used towards any or all of the costs associated with your purchase on closing (i.e legal fees, land transfer tax etc…)

How do I pay back my Home Buyers’ Plan?

Just because you have this money now, doesn’t mean you’re out of the woods just yet. Since the Home Buyers’ Plan is technically considered an interest-free loan (yes — that means it’s halal), the Canadian Revenue Agency gives you 15 years to repay the amount you took out for your home. The first payment (1/15 of the withdrawal total) is due back to your RRSP two years after your withdrawal. So if you used the HPB in 2019, your first payment will be due when you file your 2020 taxes (2019 is considered as year 1 and 2020 is year 2) which will be at the end of April 2021.

If you took out the full $35,000 from your RRSP as part of the HBP, your minimum annual repayment would be $2,333.33 as an example. If you’ve taken a lesser amount, then divide that number by 15 and you will get your repayment number. And if you don’t want to punch any of these numbers into a calculator, don’t fret, the CRA will tell you the balance you have to repay, the amount you have already repaid, and the amount of your next payment on your next Notice of Assessment, as well as on your HBP account statement that you’ll receive.

I still have more questions. Where can I find more information?

If you have questions about your HBP balance you can log in to your CRA MyAccount or give the CRA a call at 1–800–959–8281. To get started with repaying, you have to make a contribution to your RRSP in the year the repayment is due or within the first 60 days of the following year.

Don’t forget that these repayment amounts are the minimum and nothing is stopping you from paying back more and getting your HBP loan paid off sooner.

Because your HBP repayment is the same as contributing to your RRSP the way you normally would, the only way they can be distinguished from one another is on your T-1 General Income Tax Return which your accountant will do on your behalf. If you file your taxes, then make sure you record it in the correct category as these repayments won’t get you additional tax deductions and you’ll end up paying more tax as technically you would have defaulted on your HBP.