Rising housing costs and inflation have made saving for the down payment of your first home more difficult than ever. For many Canadians, the idea of owning their own home is not even a consideration. But what if we told you there are resources that you as a first-time homebuyer can use to greatly increase your chances of moving into your dream home? Introducing the First Home Savings Account - Canada’s ultimate registered plan that will help make your dream home a reality.
The Basics of a First Home Savings Account (FHSA)
What is an FHSA?
An FHSA is a registered plan that allows first-time homebuyers to save and invest their money more efficiently. The Canadian government introduced the resource to help combat the difficulty of homeownership many prospective buyers were and still are facing.
An FHSA provides tax benefits on your earnings and contributions to maximize your saving potential. You can contribute up to $8000 each year with a lifetime limit of $40,000. Any unused contribution room can be carried forward to subsequent years. However, there are tax implications if you exceed the contribution limit. To open an FHSA, you must meet certain eligibility requirements that we’ve listed below.
Who can open an FHSA?
To qualify for an FHSA, you must meet the following requirements:
- You must be between the ages of 18 and 71.
- You need to be a Canadian resident.
- You must not have lived in a home you or your spouse or common-law partner owned during the current calendar year or previous four years.
Beyond these requirements, you will need to provide your social insurance number and other documents to the financial institution where you are trying to open an FHSA. For more details on requirements, you can visit the Canada Revenue Agency website.
What are the benefits of an FHSA?
An FHSA is a unique registered plan for Canadians that combines the best elements of other investment tools into one. Here are some of the key benefits of owning an FHSA:
- You can make tax-deductible contributions to your FHSA just like you can with a Registered Retirement Savings Plan (RRSP). This means you are paying less in taxes each year while simultaneously investing your money towards your future home buying goals.
- An FHSA also allows you to make tax-free withdrawals just like a Tax-Free Savings Account (TFSA). Therefore, all the interest you earn from your investments is yours to keep!
- You can contribute to an FHSA for up to 15 years, which gives you enough time to construct a long-term savings strategy.
- This registered plan also pairs extremely well with other home buyer investment solutions. For instance, you can pair your FHSA with a Home Buyers’ Plan (HBP) which allows you to withdraw funds from your RRSP to contribute towards your first home purchase.
How do I open an FHSA?
So, you’ve decided to embark on your home buying journey and open an FHSA. But where do you start? Here’s a quick general breakdown on how you can open an FHSA.
- Check Your Eligibility: First and foremost, you need to make sure you meet all the requirements to apply for an FHSA. You can always visit the CRA (Canadian Revenue Agency) website for more information on what you need to qualify for this registered plan.
- Contact a Financial Institution: Banks, credit unions, trusts, or insurance companies are examples of organizations that offer an FHSA. Look at everything from welcome offers, account maintenance fees, rates, and customer service to help make your decision on where to start investing.
- Provide Your Documents: You will likely need to provide your address, date of birth, social insurance number (SIN), contact details, employment information, and any other documents the financial institution requests.
- Review the Terms of Your Agreement: Make sure you understand what types of investments you can make, what your contribution limit is, and any penalties for exceeding said limit.
- Start Investing: Start researching investment opportunities or simply earn interest on your balance. Speak with an expert to get started.
Where can you open an FHSA?
You can open an FHSA at most financial institutions. We're currently running an exclusive offer on our FHSA where you can earn incredibly high interest on your contributions and pay zero monthly fees! You’re not going to find a better deal than that on the market.
Remember, every Canadian deserves to own their dream home and with an FHSA, you move one step closer to that goal. Start investing and saving for your future today. Speak with a financial advisor to see how you can make your dream home a reality.
*Rates subject to change without notice.