As part of the 2022 federal budget, the Canadian government wants to provide initiatives designed to make homeownership more affordable. One way they plan to accomplish this is with the new First Home Savings Account (FHSA).
Aimed at first time home buyers, this new program will give prospective homeowners some tax relief as well as make it easier for them to achieve their homeownership goals. The FHSA does not replace the RRSP Home Buyer's Plan that already exists, however, it’s important to note that the two programs cannot be used in tandem. While the RRSP Home Buyer's Plan requires withdrawals from the account to be repaid, the FHSA does not.
Learn More About First Home Savings Accounts
First Home Savings Accounts are expected to be available in 2023. There will be eligibility requirements, as well as rules and conditions, so it’s best to consult with a mortgage broker or financial institution to determine if and how you can make this new option work for you.
In the meantime, here are some top things to know about this new savings option:
- You’ll be able to contribute up to $8,000 annually, up to a lifetime maximum of $40,000.
- Contributions made to an FHSA are tax deductible.
- Funds can be withdrawn from an FHSA tax-free, as long as the funds will be used for a first-time home purchase.
- It is likely that funds in an FHSA will be able to be invested to support growth in limited ways such as stocks, bonds, mutual funds, but these specifics have not been confirmed by the government.
- Any income made from investing FHSA funds will also be tax free.
- Transfers can be made from an RRSP to an FHSA but are subject to the FHSA annual contribution limit.
- Transfers can be made from an FHSA to an RRSP or RRIF if no home is purchased and this will not affect RRSP contribution room. This provides great flexibility for first time buyers who may end up buying a home with someone else who also has an FHSA.
All in all, there is no downside to the new FHSA as a savings vehicle and this very well could be a big step in the right direction when it comes to making buying a first home easier.
Let Sue Heddle Homes Help You Purchase Your First Home
Buying your first home is a very exciting time, but it can also be overwhelming. With an experienced Oakville realtor like Sue Heddle, you’ll get local expertise, excellent negotiation skills and more than a decade of proven success helping clients find a home they love. If you have any questions about the current real estate market or about the home buying process, contact us. We’d love to help you find your first home.