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I'm a Toronto-based Mortgage Broker. My focus: to mentor and educate first-time home buyers, people with less-than-perfect credit, and people in business for themselves, to make the best mortgage choices for them.
Quick and dirty deets on the new First Home Savings Account
Can the FHSA help you buy your first home?
On April 1, 2023, the Canadian government introduced the First Home Savings Account (FHSA) that is basically a hybrid between an RRSP and a TFSA. Like an RRSP, the FHSA reduces your taxable income, giving you either a bigger tax refund (which you can use to increase your down payment too!) or reducing the amount of tax you owe. Like a TFSA, you can withdraw the funds without needing to repay the money. And like both vehicles, earnings within the FHSA aren’t taxable, as long as you use the money to buy your first home.
What are the restrictions on the FHSA?
The FHSA does come with some restrictions:
1. The max you can contribute is $8,000 per year
2. In total you can contribute up to $40,000
3. You need to use the funds within 15 years
4. You need to be a first-time homebuyer
5. You can’t use the funds to buy an investment property
How to use the FHSA for home ownership
Now for some ideas on how to best use the First Home Savings Account to achieve your home ownership goals:
1. Start early: Begin contributing to the First Home Savings Account as early as you can, to take advantage of the tax benefits and boost your down payment for your first home.
2. Contribute regularly: Set up an automatic savings plan or make a schedule to ensure you max out the annual contribution amount. You can carry forward unused room to the following year if you need to.
3. Make a game plan to buy your first home: Set a savings goal based on the type of home you want to purchase and its estimated cost. Check out my infographic for a helpful overview of the steps for buying your first home.
Add the FHSA to the other first-time homebuyer savings vehicles
Make sure to also check out the RRSP Home Buyers’ Plan (HBP) and First-Time Home Buyers Incentive (FTHBI) that can provide you with benefits in buying your first home. The FHSA can enhance these, depending on your specific time frame and homebuying goals.
Questions? Don’t hesitate to reach out
Feel free to contact me if you would like to chat about your homebuying plans in more detail. I’m here to help!
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