After being announced earlier this year, finally we have some more info to share on the First home savings account ("FHSA"). Our team has put together the piece below for further reading.  On first glance, this can be a great tool for those looking at buying their first home, and for those looking to assist with this purchase (e.g. parents/grandparents). 

 

So how does it work? Once you turn 18 you can contribute up to $8,000/yr to the account to a maximum of $40,000 (so, 5-yrs at $8,000 per year). The beauty with this, each of those contributions are tax deductible, any/all investment income/gains are earned tax-free, and any withdrawals (assuming they are used to buy a house) are also tax-free. Now, there are some nuances, but this account seems to contain the best of an RRSP and TFSA. 

 

As many of you are aware, first time home buyers have been able to use up to $35,000 of their RRSPs to make their first home purchase via the home buyers plan (HBP); however, it's capped at $35K. which even if paired with their spouse/partners, it won't get you very far in today's Canadian real estate market, especially in a market that possess decent job opportunities, etc. 

 

The FHSA has some potential to really help.

 

Imagine this. You are a young 18-yr old who aspires to one day own a home. With the help of your parents/grandparents and your own hard work, are able to save $8,000/yr for five years. Frankly with the wealth transfer happening in Canada, this scenario isn't that outlandish. Now, if you prudently invest these funds until you are ready to make that first purchase (avg. age in Canada is ~36), you will have likely/hopefully been able to grow that $40K into a meaningful amount of money. And if doubled with a partner, you will probably have a sizable down payment. 

 

From the sounds of it, accounts will be available next year. If you wish to learn more, please read our Navigator article below.