First Home Savings Accounts (FHSA)

Have you been dreaming of owning your first home, or perhaps have a family member that is? The Canadian government introduced the First Home Savings Account (FHSA) earlier this year to help Canadians save for their first home. This new savings account is designed to make it easier to enter the housing market, to get you into your new home sooner.

To be eligible for an FHSA, Canadians must be at least 18 years old and the money is to be used for purchasing your first home. You are considered a first-time homebuyer, for the purposes of this plan, if you haven’t owned a home within the last four calendar years. Contributions can be made by the account holder, up to a maximum annual contribution limit of $8,000 per year, and lifetime limit of $40,000.

Similar to your RRSP, contributions to your FHSA will be tax-deductible, and unused room can be carried forward. If you don't use your FHSA to buy a home, you can transfer the funds to an RRSP account anytime within 15 years. The transfers will not impact your RRSP’s contribution room. Alternatively, you can withdraw the amount, but the funds would be subject to taxes. Another benefit of an FHSA is that the money saved in the account can be invested in a range of investments, including mutual funds, bonds and GICs and any growth in the account happens tax-free.

How is this different than the current RRSP First Time Home Buyer’s Plan (HBP)? The RRSP HBP allows you to withdraw up to $35,000 from your RRSP to help buy your first home. However, the amount you withdraw must be repaid to your RRSP within 15 years. The new FHSA does not require you to make repayments to the account once you have withdrawn the funds.

If you are looking to buy your first home, reach out to get your FHSA opened.

Be Well Advised.