Tax Planning
Planning Your First Home Purchase? How Canada’s Updated RRSP HBP Grace Period Helps
New proposals extend grace periods under the Home Buyers’ Plan—this could be a game-changer for those saving with RRSPs to buy their first home.
By NomadicTax Research Team • 5-8 min read • May 22, 2026
## What Is the Home Buyers’ Plan (HBP)?
The HBP allows eligible Canadians to withdraw up to **$60,000** from their RRSP to purchase or build a home, or for a specified disabled person, without being taxed on the withdrawal. Joint buyers can each make the withdrawal. Under normal rules, repayment begins in the second year after withdrawal and must be completed over **15 years**. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/tm-mf-en.html?utm_source=openai))
## What Changed Under Spring Economic Update 2026
- The Government proposes extending the five-year **grace period** before repayment must begin. Previously, this temporary five-year grace period applied only for first withdrawals between **January 1, 2022 and December 31, 2025**. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/tm-mf-en.html?utm_source=openai))
- Under the new proposal, that grace period will be **available for participants making a first withdrawal up to the end of 2028**. For those qualifying, the 15-year repayment period will start in the **fifth year** following first withdrawal, instead of the second. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/tm-mf-en.html?utm_source=openai))
## Who Benefits Most
- First-time homebuyers planning a purchase in **2026-2028**: Gives more breathing room before repayment obligations start.
- Those saving within an RRSP already: Strategy can include delaying initial withdrawal until just before the 2028 deadline.
- Families or people rebuilding savings who want more flexibility.
## Pros & Cons to Weigh
**Pros**:
- More time to repay gives cash flow flexibility.
- Helps reduce pressure in the early years of home ownership.
- More time to find stable income sources before the repayment kicks in.
**Cons**:
- Longer grace period may correlate with longer time before the account fully replenishes.
- If RRSP investments don’t perform well, withdrawals and repayments could affect available contribution room.
- Because interest isn’t charged, opportunity cost is the bigger concern.
## Actionable Planning Tips
- **Plan your timeline**: If possible, wait until late 2028 if you want the extended grace.
- **Budget for repayment year**: Know that repayment must begin no later than the fifth year after withdrawal. Plan income accordingly.
- **Contribute RRSPs early**: To maximize tax-sheltered growth before withdrawal.
- **Maximize first-time buyer incentives**: Combine with FHSA (First Home Savings Account), provincial incentives and rebates.
- **Review with professional**: If you expect income fluctuations, it may be useful to model repayment scenarios with your tax advisor.
## Context & What’s Proposed
These changes are **proposed under the Spring Economic Update 2026**, meaning legislation still needs to be passed. They apply to the **2026 and subsequent taxation years**. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/tm-mf-en.html?utm_source=openai))
## Summary
If you’re a first-time homebuyer in Canada considering using the HBP between now and end-of-2028, these changes give **you more flexibility** to structure your RRSP withdrawals and repayment. Thoughtful planning now can help smooth finances for the future.