First Home Savings Account Helps Homes Buyers
Once in a while the federal or provincial governments will introduce programs which appear to really help Canadians in their quest for home improvement or home buying.
Residential energy efficient programs are the perfect example. BC Hydro has its excellent PowerSmart program which offers home owners abundant tips and incentives to make your home more energy efficient. Rebates for insulation, windows, doors, space heating and heat pumps are a few of the areas.
The federal Home Buyer Plan (HBP) allows a buyer to withdraw from a registered retirement savings plan (RRSP) to buy or build a (qualifying) home.
In the 2022 Federal Budget, a new program called the First Home Savings Account was introduced which sounded very intriguing based on the pundits and experts who commented on its strengths and weaknesses. It is similar to the Home Buying Plan and an RSP but offering more benefits to any qualified person opening up this type of account.
Recently, Tim Cestnick with the Globe and Mail published an excellent article on how this program will work and its benefits. I reached out to Tim over the weekend of the 26th and he graciously replied with a link which allows non-subscribers to read his article.
He identified 9 points or strategies; I identified the major ones and summarized them below – read the article linked here to see full details and then check with your financial planner or accountant for professional advice:
- Open an FHSA as soon as possible – even if you don’t contribute in 2023, you get the benefit of the $8,000 of carry-forward room when you can afford to contribute, say, in 2024. If you wait until 2024, then you will lose the 2023 contribution room.
- Choose the FHSA instead of the HBP. You can accumulate more in the FHSA; the HBP requires you to repay your RSP over time; and the FHSA provides a tax deduction and the ability to save over and above your RRSP.
- Make contributions early – get your FHSA working for you early.
- Contribute to an FHSA before your RRSP.
- Contribute even if you are not sure you will buy a home. If you choose not to buy, you can add your FHSA funds to your RRSP as it doesn’t use up your RRSP or RRIF room. This is like an extended RRSP.
Here are the links:
Tim Cestnick’s article First Home Savings Plan
Federal Home Buyer’s Plan (HBP)
The FHSA sounds like an amazing opportunity to help young people in particular get into the market with a financial instrument which also has tax benefits like an RRSP as well.