How can you use your RRSP as a down payment on a real estate purchase? How do financial institutions manage this procedure?

It’s really quite simple. If you are considered a first-time buyer*,  you can withdraw $35,000 from your RRSP without any income tax penalty as soon as you have submitted an unconditional purchase offer. This amount can be used for a down payment, for purchase-related costs, for settling a few debts, or for renovations. In sum, you can use this money any way you want to.

The HBP program requires that a $35,000 RRSP withdrawal be repaid within 15 years at an annual minimal amount of $2,333.33 will be added to your annual taxable income. Your first repayment starts the second year after the year you withdrew funds from your RRSP’s. If you do not make the annual repayment to your RRSP you have to include it as RRSP income on line 129 of your income tax return.

* HBP definition of a first-time buyer: A first-time buyer is a person purchasing their first principal place of residence or a person who has not been the owner of their principal place of residence for five years.