Can You Use the RRSP Home Buyers’ Plan on a Mixed-Use Property?

Home-buying programs for mixed-use properties

Buying a home is one of the most important financial milestones many Canadians face. It often requires careful saving and planning, and for some buyers the property they want will include both residential and commercial uses. Fortunately, there are federal programs that can help first-time buyers access savings held in registered accounts to purchase a qualifying residence.

What home-buying programs are available?

Historically, the Home Buyers’ Plan (HBP) has been a widely used option. The HBP lets eligible first-time buyers withdraw up to $35,000 from a registered retirement savings plan (RRSP) without immediate tax consequences, provided the amount is repaid to the RRSP over a 15-year period starting in the second calendar year after the withdrawal. For example, funds withdrawn in 2023 would start requiring repayment in 2025 and must be fully repaid by the end of 2040.

More recently, the federal government introduced the First Home Savings Account (FHSA) on April 1, 2023. The FHSA is a tax-advantaged account designed specifically for first-time home buyers. It allows annual contributions of up to $8,000 and a lifetime maximum of $40,000. The FHSA combines features of a tax-free savings account (TFSA) and an RRSP: contributions are tax-deductible, investment growth is tax-sheltered, and qualifying withdrawals to purchase a first home are tax-free.

Buyers can now use both the HBP and the FHSA together, giving a combined potential of up to $75,000 for a single buyer, or up to $150,000 for couples where each partner qualifies—significantly increasing the funds available for a down payment or closing costs.

Who qualifies as a first-time home buyer for the HBP?

For the HBP, you qualify as a first-time home buyer if you, or your spouse or common-law partner, did not own and occupy a home in the four calendar years before the year you make the RRSP withdrawal. The same basic eligibility test applies to the FHSA. If you owned a home more than four years before your withdrawal year, you may requalify and become eligible to use these programs again.

Definition of a qualifying home: Does it include commercial properties?

The Canada Revenue Agency (CRA) defines a qualifying home as a housing unit in Canada, either existing or to be built. Examples include single-family houses, semi-detached homes, townhouses, mobile homes, condominiums, cooperative housing units, and residential units in duplexes, triplexes, fourplexes, or apartment buildings.

A purely commercial property does not meet the CRA definition of a qualifying home and would not be eligible for the HBP or FHSA. However, when a property is mixed-use and part of it is clearly a housing unit—evidenced by the fact you pay residential property taxes on that portion and intend to occupy it as your principal residence within a year of purchase—the residential portion can qualify. In practical terms, if the unit you plan to live in fits the CRA’s description of a housing unit and you plan to use it as your principal residence, you should be eligible to withdraw funds under the HBP or use an FHSA.

Consider using both the HBP and FHSA

The FHSA offers some advantages over the HBP: withdrawals to buy a qualifying first home do not need to be repaid, and contributions are tax-deductible. If you ultimately do not buy a home, you can either close the FHSA and report any withdrawal on your tax return or transfer the funds directly to your RRSP without affecting your RRSP contribution room.

Because the FHSA has annual and lifetime contribution limits, many buyers will still rely on RRSP savings. You can transfer funds from an RRSP to an FHSA on a tax-free basis up to your available FHSA contribution room; you will not receive an additional tax deduction for that transfer since the original RRSP contribution was already deducted, but you also will not be required to repay the amount. A practical approach for buyers with savings in both accounts is to use the FHSA limit first and then take the remainder needed from the RRSP under the HBP to maximize flexibility and minimize repayment obligations.

Both programs can be valuable tools for first-time buyers, including those purchasing mixed-use properties where a residential unit will become their principal residence. Because individual circumstances vary, it’s wise to consult a Certified Financial Planner (CFP) or a Qualified Associate Financial Planner (QAFP) to design the strategy that best fits your timeline, tax situation, and homeownership goals.

Read more from Ask a Planner:

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• Should you claim the principal residence exemption on a property you bought your child?