Find out if an FHSA might be right for you! Here's what mortgage professional @Alexmortgagemanagement says you need to know about the FHSA:
What is the FHSA?
The FHSA is a new registered savings plan for Canadians saving to buy their first home. It combines the best of the RRSP and TFSA methods of saving for a first time down payment!
Who is it for?
This new program is available to Canadians over the age of 18 and only for first-time buyers (some exemptions apply).
What are the benefits?
-Like an RRSP, contributions are tax-deductible
-Like a TFSA, qualifying withdrawals will not be taxed
-Earnings on your investments inside the account won't be taxed
-Unlike an RRSP, there is no withdrawal limit so funds don't need to be repaid after the withdrawal
The contribution limit is $8000/year to a total of $40,000. Unused contribution room in one year can carry forward to the next year but only $8000 can be carried forward - making your new contribution limit for that year $16,000 (restrictions apply).
The fine print
You can transfer funds from your RRSP into your FHSA, but the amount cannot be deducted from your taxable income again. Be careful not to over-contribute, as you may be taxed 1% per month on excess funds.
If you want to double up, you can still leverage the Home Buyer's Plan to withdraw from an existing RRSP and your FHSA for a down payment.
When can I start?
All the Big Institutions have made statements that although the legislation opened the door to the FHSA on April 1st, most have to go through the administrative process of implementing a new account, so we can expect the accounts to roll out sometime this year. Meaning that even though the FHSA is live by the government, depending on your institution, you may not be able to deposit or access the $8000 for purchasing a home yet.
Keep an eye out at your bank because you'll likely see some promotional deals coming down the pipe when they are ready to launch!
Ensure you speak to your Accountant and Financial Planner to discuss the best option for you between the RRSP (HBP) or the FHSA (ideally utilizing both) depending on the timing of your purchase.
Still have questions? Wondering if this is for you? Let's connect!