Family Law with Carrie Campbell; Separated spouses can borrow from RRSP's for home down-payment

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Carrie Campbell

I am a member of two fantastic mediation associations, OAFM and FDRIO. One of the perks I regularly take advantage of, is the information/learning opportunities they both provide. During one such meeting, I was reminded about an exciting change that has taken place with RRSPs and the Home Buyer’s Plan for separated people.

For some time now, the Canadian Revenue Agency, through their “Home Buyer’s Plan”, has allowed first-time home buyers to effectively borrow from their RRSPs, for their down-payment for a home. Effective this year, if you are separated from your spouse, you may qualify to do so again, even if you have previously owned property and therefore are not a “first-time” home buyer. This is very exciting to me, as I know how tough it is to rebuild, financially, after a separation. These changes allow a person, who has separated, to withdraw up to $35,000 from his/her RRSP, for the purchase of a home. There is no tax holdback, however the amount withdrawn, must be paid back to the RRSP over a 15 year period.

To benefit more people, this new rule applies to people who have been married, and are now separated, as well as to people who have separated from a common-law relationship. I also understand you can be separated for up to four years and still potentially take advantage of this opportunity. There are some limitations – one being that the home cannot be one that your new partner owns and occupies. If you have separated, and you thought you would have to cash out your RRSPs in order to purchase a home, you may benefit from these new Rules. I recommend speaking with your bank/mortgage broker to see how these rules will apply to your particular situation.

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