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The RRSP Home Buyers’ Plan has a number of strict conditions and some potentially make big costs. The important restriction is you or your spouse is allowed to make a contribution to your RRSP in the year that you withdraw funds under the plan. The government does not want people to put money into their plan to get tax break and then draw on the same funds to use as a part of a down payment. If you have regular contributions to your RRSP and you have been building the tax refund into your budget you need to prepare for the loss in cash flow. You have to keep in mind the payments are not considered RRSP contributions and you don’t get any tax write offs for them. Also if you miss a payment or part of a payment, the government treats that money as if you had withdrawn it directly from your RRSP. The sum is including as a part of your income for that year, and you have to pay tax on it. If you are currently finding it tough to put money into your RRSP, it will be twice as hard if you use your retirement funds for a down payment.
When you are selling your home before you have paid off the RRSP loan. You do not have to repay the remaining balance if you sell your home before your scheduled payments are complete. Also you are not required to continue to own the home until the amount borrowed is repaid. These kid of situation the outstanding repayment instalments have to be reported as income by the borrower. Also the other situation is when you are leaving the country, If a taxpayer ceases to be a resident of Canada, the balance of withdrawals made under the plan and not yet repaid must be repaid within 60 days of ceasing residency, or must be included in the individual's income for that year. If you die, When an individual dies with an outstanding Home Buyer's Plan repayment balance, the outstanding amount must be included in the deceased's income for the year. There is an election that may be made in certain circumstances to allow a spouse of the deceased to effectively take over the deceased's obligations with respect to repayment instalments.
When your RRSP matures. If you have an outstanding Home Buyer's Plan repayment balance at the end of the year in which you turn 69, the deadline for collapsing an RRSP this outstanding amount must be repaid before year end or be reported as income on your tax return.