… What happens when the clock runs out
You’ve done it — bought your first home, maybe with a little help from your RRSP through the Home Buyers’ Plan (HBP). It felt like a smart move at the time (and it often is). But fast forward, and life has a funny way of throwing curveballs: job changes, unexpected expenses, or even just the rising cost of everything. Suddenly, those HBP repayments you promised to make feel like a stretch.
So what happens if you can’t pay it back on time? Is there a tax penalty? Can you get more time? Allow me to walk through exactly how the HBP works, what to do if you fall behind, and some real-world strategies to protect yourself from a big tax bill later.
Topics I’ll Cover
When Do You Start Making Repayments?
How to Repay the Amount You Withdrew
Missing a Payment and Tax Consequences
Can You Get an Extension Beyond 15 Years?
Special Repayment Situations (Death, Age 71, Non-Resident)
Strategies to Avoid a Big Tax Bill
Life Story: Tom & Lisa’s Repayment Wake-Up Call
How Realtors and Clients Can Put This Into Practice
When Do You Start Making Repayments?
Under the current rules, you have 15 years to repay the amounts you withdrew from your RRSP under the HBP back into an RRSP, PRPP, or SPP. Normally, your repayment period starts the second year after the year you made your first withdrawal.
Example: If you made your first withdrawal in 2020, your first repayment year was 2022.
What’s new: There’s temporary repayment relief for first withdrawals made between January 1, 2022, and December 31, 2025. If you qualify, your repayment period starts five years after the year of your first withdrawal.
- For example, if you withdrew in 2022, your first repayment year will be 2027 instead of 2024.
You can start repaying earlier if you want, but your repayment period doesn’t change — it just means you’ll owe less in later years.
How to Repay the Amount You Withdrew
Repayments are made by contributing to your RRSP (or PRPP/SPP) and then designating that contribution as an HBP repayment on Schedule 7 of your income tax return.
The minimum repayment each year is 1/15th of your original withdrawal. For example, $60,000 ÷ 15 years = $4,000/year.
Your annual HBP statement of account from the CRA will tell you:
- How much you’ve repaid so far
- Your remaining balance
- The minimum repayment required for the next year
Important notes:
- Repayments do not affect your RRSP deduction limit — even if your RRSP room is zero, you can still repay.
- You cannot claim a tax deduction for amounts designated as HBP repayments.
- You can repay more than the minimum — doing so will lower your balance and reduce future minimum payments.
Missing a Payment and Tax Consequences
If you pay less than the minimum in a given year, the shortfall is added to your taxable income as RRSP income (line 12900).
Example: Minimum $4,000, you repay $2,500. The $1,500 difference gets added to your income and taxed at your marginal rate.
If you make no repayment in a given year, the full minimum required amount is added to your taxable income.
And here’s the big one: At the end of the 15 years, any remaining balance is fully added to your taxable income in that final year. No payment plans, no extensions.
Can You Get an Extension Beyond 15 Years?
In a word: No. Once the repayment period ends, the balance becomes taxable income in that year.
The only real “extension” available is the temporary repayment relief for withdrawals between 2022 and 2025, which delays the start of repayment by three years.
Special Repayment Situations
Life can throw more complicated scenarios your way:
- Death: If you die before repaying, your remaining HBP balance is included in your final tax return — unless your spouse or common-law partner elects to take over repayments.
- Turning 71: You can’t contribute to an RRSP after the year you turn 71. At that point, your remaining balance will be included as taxable income each year over the remaining repayment period.
- Non-Resident: If you become a non-resident before buying a qualifying home, you must either cancel your HBP or include the unpaid balance in your income. If it’s after purchase, you must repay quickly or include it in income.
Some contributions cannot be designated as repayments, such as amounts made to a spouse’s RRSP or certain transfers from other registered plans.
Strategies to Avoid a Big Tax Bill
Here’s how to make sure you don’t get burned at tax time:
- Automate Repayments: Set up a recurring RRSP contribution equal to your minimum repayment.
- Pay Extra in Good Years: Got a commission bonus or side income spike? Throw it at your HBP.
- Adjust Your Mortgage Amortization: Extending your amortization can lower monthly mortgage payments, freeing up cash for RRSP repayments.
- Combine with FHSA: Use a First Home Savings Account alongside HBP withdrawals — FHSA withdrawals never need to be repaid.
- Check Your HBP Statement: Use CRA My Account to keep tabs on your balance and required payments.
A Life Story: Tom & Lisa’s Repayment Wake-Up Call
Tom and Lisa, first-time buyers in Oshawa, each withdrew $40,000 from their RRSPs — a combined $80,000. That meant $2,666/year each in repayments.
They kept up for a while, but daycare costs and home repairs got in the way. In some years, they repaid less than the minimum, and those shortfalls got added to their income — costing them an extra $3,500 in taxes over time.
By Year 15, Lisa still owed $7,000. That full amount hit her taxable income, bumping her into a higher bracket and adding $2,100 in tax. If they’d adjusted their amortization or automated payments earlier, they could have avoided it.
How Realtors and Clients Can Put This Into Practice
For Realtors:
- Remind past clients about HBP repayments in your annual check-ins.
- Highlight the FHSA + HBP combo as a powerful down payment tool.
- Partner with a mortgage agent (that’s me) to help clients map their cash flow.
For Buyers:
- Treat HBP repayments like a non-negotiable bill.
- Use CRA My Account to track your repayment status.
- Lean on your mortgage agent to explore strategies for freeing up repayment funds.
Allen’s Final Thoughts
The HBP can be a fantastic way to make homeownership happen sooner — but it’s not free money. Think of it as borrowing from your future self. Missed payments don’t mean a collections agent shows up at your door, but they do mean a bigger tax bill than you planned for.
The best defense? Plan ahead. Automate repayments, take advantage of repayment relief if you’re eligible, and use tools like the FHSA to reduce your HBP burden.
As your mortgage agent, I can help you design a repayment strategy that fits your budget, coordinate with your financial planner, and even structure your mortgage for better cash flow. My goal is to keep your dream home from turning into a tax-time nightmare.
Buying your first home is exciting — let’s make sure paying for it stays that way.
