The changes to the HBP rules in respect of first-time home buyers announced in Budget 2019

To provide first-time home buyers with greater access to their RRSP savings to purchase or build a home, Budget 2019 proposes to increase the Home Buyers’ Plan withdrawal limit to $35,000. This would be available for withdrawals made after March 19, 2019.

For HBP withdrawals made after 2019, the budget proposes to permit an individual who would not otherwise be considered a first-time home buyer under the HBP at the time of the withdrawal to be considered a first-time home buyer if:

• at the time of the withdrawal, the individual:
  • is living separate and apart from their spouse or common-law partner because of a breakdown of their marriage or common-law partnership,
  • has been living separate and apart from their spouse or common-law partner for a period of at least 90 days, and
  • began living separate and apart from their spouse or common-law partner in the year of the withdrawal or in the four preceding calendar years; and
• where the individual owns and occupies a home that was the individual’s principal place of residence at the time of the withdrawal, either:
  • that home is not the qualifying home that the individual intends to acquire with the funds obtained from the withdrawal, and the individual sells the home (or disposes of their interest or right in the home to their separated spouse or common-law partner) no later than the end of the second calendar year after the year of the withdrawal, or
  • the individual otherwise acquires the interest or right of their separated spouse or common-law partner in the home (e.g., where the home is the matrimonial home) no earlier than 30 days before the withdrawal and no later than September 30^thof the year following the withdrawal; and
• if the individual has a new spouse or common-law partner at the time of the withdrawal, the new spouse or common-law partner does not own and occupy a home that is the individual’s principal place of residence.

Example 1:

Morgan and Kelly separated on February 1, 2019 because of the breakdown of their marriage. Morgan and Kelly occupied the matrimonial home, which Morgan owns, up until the time of separation. On June 1, 2020, Kelly, who lives on her own outside of the matrimonial home, wishes to make an HBP withdrawal to build a new qualifying home.

Under the HBP rules, Kelly would not be considered a first-time home buyer on June 1, 2020. This is because, during the four-year period, the matrimonial home was Morgan’s owner-occupied home, which Kelly lived in during their marriage.

However, under the proposed changes to the HBP rules, Kelly would be deemed to be a first-time home buyer on June 1, 2020 because, at that time, she:

• lives separate and apart from Morgan as a result of the breakdown of their marriage;
• has been living separate and apart from Morgan for at least 90 days; and
• began living separate and apart from Morgan in the year preceding the withdrawal.

Provided Kelly satisfies all other conditions under the HBP rules on June 1, 2020, she can make the HBP withdrawal under the proposed changes.