The First Home Savings Account launched in April. Here's how many Canadians have signed up
Published Thursday, October 12, 2023 6:17AM EDT
With rising interest rates, home prices and inflation, a recent survey found most Canadian millennials have delayed buying a home.
The research by real estate brokerage Zoocasa found 67 per cent of those 1,600 surveyed were currently or had recently put off the idea of home ownership in the current economic climate.
But the First Home Savings Plan (FHSA), introduced by Ottawa in April, could be beneficial for those trying to save for a down payment and 150,000 Canadians have already signed up.
Evelyn Jacks, author of 55 tax books, and president of the Knowledge Bureau based in Winnipeg said that the FHSA could help get some Canadians closer to home ownership and they may want to consider opening an account by the end of the year.
“It's a triple win. You get a tax deduction, the amount grows tax-free and then you've got a tax-free withdrawal if you buy a qualifying home,” Jacks said.
To open a FHSA, you must be between 18 and 71 years of age and a Canadian citizen. You can make annual contributions of $8,000 that are tax deductible and there is a $40,000 lifetime limit.
The account can stay open 15 years and you can withdraw funds tax-free to purchase your first home and most banks and financial institutions now offer them.
Robby Aurora, a mortgage expert with Mortgage Connection, a mortgage brokerage, said a FHSA can be used in combination with other savings programs already available.
"You can stack this program with other programs that exist out there such as the home buyers plans where you can withdraw from your RRSPs,” said Aurora.
You are allowed to borrow up to $35,000 from your RRSP towards a home, but funds must be paid back within 15 years and you could also use money saved in a Tax-Free Savings Account (TFSA) towards the purchase of a home.
Two people working together to buy a home could stack the three programs and combine funds towards a home purchase. For example one person could have $40,000 in a FHSA, $35,000 in an RRSP and $25,000 in a TFSA for a total of $100,000.
If the other person had the same amount that totals $200,000 towards a home purchase.
Of course, in the current economic climate it can be hard to set aside money to save, but even if you don't buy a home the FHSA may still be a good option according to Jacks.
“That $40,000 or whatever you have accumulated can be transferred into an RRSP. So it's extra RRSP room you wouldn't normally have and that's great," said Jacks.
Even if you have owned a home before you may still be eligible for the FHSA program.
“If you have not lived in a home, that you have owned or your common-law partner or spouse has owned in the past four years you are eligible as a first time home buyer," Aurora said.
You can find more information on the FHSA through the federal government's website or with your bank or investment dealer.
According to the Canadian Department of Finance more than 150,000 Canadians have already opened one, so if you're goal is to own a home in the future, a FHSA may be worth considering.