Personal Finance

Question about repaying HBP after separation

  • Last Updated:
  • Jun 10th, 2019 7:34 pm
[OP]
Member
Feb 2, 2006
359 posts
108 upvotes

Question about repaying HBP after separation

Hi everyone, I have a question about repaying back RRSPs withdrawn for a downpayment through the Home Buyer's Plan after a separation.

I'll use some hypothetical numbers:

Salary: $100K
HBP Original withdrawal: $20K
Amount of years to pay back: 10

Please feel free to correct anything I'm not fully understanding.

So, it's pretty obvious that based on the numbers above, one has to designate $20K / 15 years = $1,333 each year towards HBP repayment.

To repay the amount each year, there are 2 choices:

1. You either invest $1,333 in RRSPs and designate the full amount for repayment.
2. You add the $1,333 to your taxes as RRSP income

If I go with #1, normally, I would get money back for investing in RRPS (let's say $550) but since I'm designating this amount for HBP repayment, I don't get any money back.
If I go with #2, I add $1,333 to my RRSP income on my taxes and it have to pay $550-580 more in taxes. I lose the contribution room.

Based on the numbers above, is it safe to assume that me having to repay the Home Buyer's Plan in this case would cost me ~$550/year and if everything was "fair", she should give me half of the $550?
Are there any reasons why it would be such an advantage to me to repay the Home Buyer's Plan amount that she shouldn't repay anything?

Thanks in advance!
3 replies
Deal Addict
Sep 19, 2009
1308 posts
317 upvotes
Toronto
Turge wrote:
Jun 10th, 2019 5:55 pm
Are there any reasons why it would be such an advantage to me to repay the Home Buyer's Plan amount that she shouldn't repay anything?
It really depends on how close to retirement you are. When you are very far, you probably are right. On the other hand, if you are close to retirement and intend to withdraw money anyway, going with option 2 you avoid the withholding tax on RRSP withdrawal.
Deal Fanatic
User avatar
Mar 23, 2008
9099 posts
5570 upvotes
Edmonton
Honestly, it seems petty to even go down this path. If this is the biggest issue you have in a separation, you're doing exceedingly well. I'd probably just leave it alone unless you really wanted to nickle and dime her and her lawyer to death.

Having said that, perhaps the "fair" thing to do is both of you contribute half of the outstanding HBP balance back into a mutual RRSP, which can then be split down the middle like everything else in the marriage assets. You can repay it all at once, she'll get back her $10k in an RRSP, everyone is happy. I'm just tossing out an idea here, but it might be something to start with. The thought of trying to balance that out over the next 10 years just makes me *sigh*

C
[OP]
Member
Feb 2, 2006
359 posts
108 upvotes
CNeufeld wrote:
Jun 10th, 2019 6:49 pm
Honestly, it seems petty to even go down this path. If this is the biggest issue you have in a separation, you're doing exceedingly well. I'd probably just leave it alone unless you really wanted to nickle and dime her and her lawyer to death.

Having said that, perhaps the "fair" thing to do is both of you contribute half of the outstanding HBP balance back into a mutual RRSP, which can then be split down the middle like everything else in the marriage assets. You can repay it all at once, she'll get back her $10k in an RRSP, everyone is happy. I'm just tossing out an idea here, but it might be something to start with. The thought of trying to balance that out over the next 10 years just makes me *sigh*

C
Out of curiosity, if the separation agreement was already done, how could I go about setting it up so we can contribute the remaining HBP balance (that's only under my name) and transferring half of the RRSPs to her? Is that even possible?

EDIT: For the record, the separation has been amicable and we'll be keeping a revolving spreadsheet for years to come since there's a disabled child involved.

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