The First Home Savings Account (FHSA) is specifically designed to help first-time homebuyers save for their down payment without having to pay taxes on the interest earned on their savings.
This means that the interest earned on the savings in the account is not taxed, nor are withdrawals from the account. Plus, since your contributions to this account are not taxed, your money will have the opportunity to grow faster in an FHSA than a traditional savings account.
If you are interested in creating a FHSA, there are a few things to note:
This savings account is eligible to Canadian residents who are at least 18 years of age.
You are a first-time homebuyer – you and/or your spouse or common-law partner have not owned a home where you lived in the year in which you open the account or at any time in the previous four years.
Allows you to contribute tax-free for up to 15 years.
The maximum contribution is $8,000 annually, plus up to $8,000 of your unused contribution room*.
Maximum lifetime contribution limit is $40,000.
Setting up automatic contributions can help you stay on track.
Another thing to consider is combining the First Home Savings Account (FHSA) with the Home Buyers’ Plan (HBP) to help you purchase a qualifying home. The Home Buyers’ Plan (HBP) allows you to withdraw up to $35,000 from your RRSP to buy a home. Keep in mind, you will need to repay the amount you draw for the Home Buyers’ Plan within 15 years back to your RRSP, PRPP or SPP.
Contact Me for Expert Advice!
If you are a first-time home buyer, the First Home Savings Account (FHSA) is a great savings plan for you. I would be happy to walk you through setting up an FHSA or provide more information and answer any questions you might have.
Tim Ward, Collingwood Mortgage Broker.
