With housing prices what they are across the country, people wanting to enter the housing market are generally looking for any opportunity for assistance that they can find. Many have made use of Canada’s Home Buyer’s Program, which enables those with retirement savings to access a portion of their RRSP in order to withdraw funds on a tax-free basis in order to put towards the costs of a home.
Qualification for participation in the program depends on a set of criteria, some related to property owned by a spouse or common-law partner. The rules around timing prior to 2020 would have excluded anyone who had recently ended a marriage or common-law partnership where they lived in a home owned by their former spouse or partner. However, changes to the program now take the dissolution of a relationship into account when assessing eligibility. More information on this below.
In order to participate in the program prior to 2020, a person was required to:
A first-time homebuyer, for the purposes of the program, is someone who, in the four years previous to the purchase of a qualifying home, has not:
This rule had the effect of excluding those who had recently divorced or otherwise ended a common-law relationship, and so a change was proposed last year in the federal budget to rectify this situation.
The first change, which came into effect in 2019, is the increase of the amount that may be withdrawn from an RRSP for the purchase of a qualifying home. As of last year, the amount of withdrawal is now $35,000. However, it important to keep in mind that under the program, the funds withdrawn must be repaid to the RRSP within 15 years to avoid tax penalties.
Starting this year, those who have recently gone through a divorce or split from a common-law partner will be allowed to participate even if they had lived in a home owned by their spouse within the preceding four-year period.
Under the new rules, a person can qualify as a first-time homebuyer if they separated from their partner within the four years prior to the withdrawal, so long as they have been living apart for at least 90 days. Additionally, they cannot be living in a home owned by a new spouse or partner at the time they make the withdrawal.
This is another scenario that would normally have been prohibited under the former rules, however, will be permitted under the 2020 changes. Under the new rules, the withdrawal may be used to purchase a spouse’s interest in a home that the couple owned and occupied together when the purchasing party acquires the interest of their former spouse or partner no earlier than 30 days before the withdrawal and no later than September 30th of the year following the withdrawal.
For example, if a person acquired their former partner’s interest on October 15, 2020, and made the withdrawal on December 1, 2020, they would fall within the time limits for qualification.
These changes to the Home Buyer’s Program will make it easier for those going through a dissolution of their relationship to find a path to homeownership on their own much more quickly than they would have been allowed under the previous scheme. However, there are many complex rules and timing requirements involved, so it is important to carefully track dates with respect to the divorce or separation, as well as the date of the transfer of an interest in the matrimonial home, if applicable.
The team at Mincher Koeman is dedicated to helping guide you through your family law issues no matter how complex they may be. Our exclusive focus on family law helps our clients navigate the emotional and financial challenges a family law matter can present. If you have a family law issue that you need assistance with, please contact us online or phone at (403) 901-3000 to talk with one of our lawyers today.
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