Many of us dream of owning our own home. But that dream can be overwhelming – especially in BC, where housing prices continue to set Canadian records. Now, there’s a new kind of savings account to help you save for a downpayment thanks to the new First Home Savings Account (FHSA)
If home ownership is part of your future — even if it feels like a distant future — now is the time to start taking advantage of the savings benefits of the FHSA so that your hard-earned money can grow into the down payment you need.
The FHSA is different from the Home Buyers’ Plan.
While the FHSA may sound similar to the existing Home Buyer’s Plan, it’s important to understand the differences. The FHSA is a tax-free, registered home-savings account that was designed specifically to help Canadians save money for a down payment on their first home — whereas the Home Buyers’ Plan is money that you can withdraw out of your RRSP to use towards purchasing a home.
The funds you deposit into an FHSA — a yearly limit of $8,000 with a lifetime contribution limit of $40,000 — are not taxed (much like an RRSP contribution), nor are any investment gains within the account (should you choose to invest it). And when you withdraw the funds for a home purchase, they’re not taxed either. It truly is a win-win! (Your FHSA contributions can also be used as tax deductions against your earned income, so that you pay less income tax, too.
When you contribute your money in an FHSA with Vancity, you’re also supporting the values you care about, such as financial inclusion, affordable-housing creation, green builders and local entrepreneurs.
Also, unlike the Home Buyer’s Plan, the money you save and withdraw from an FHSA does not need to be repaid, making it the logical first place to invest your down-payment savings. If you’re already saving up with the Home Buyer’s Plan in an RRSP, your FHSA savings can be combined with this amount and used towards the same qualifying home.
Are you eligible for an FHSA?
Making such a significant, life-changing purchase takes time and planning, but it becomes a lot more attainable when you use the financial tools and support available to you. But first, you’ll need to ensure you qualify for the FHSA’s eligibility requirements:
- Be aged 18-71
- Be saving to buy a qualifying home in Canada
- Be a current tax resident of Canada
- Have a valid SIN
- Meet the first-time home buyer conditions
If you meet the eligibility requirements, and are saving for your first home purchase, the FHSA offers the flexibility to save your money or grow it with a variety of products that align with your goals.
The best time to start building your FHSA is now.
You can start saving now and keep your FHSA open for 15 years, with the option of transferring your entire savings — without paying taxes — to an RRSP or RRIF if you don’t end up buying a home at the end of that period, or by the time you are 71 years old.
If you’re opening an FHSA at a younger age, you’ll want to ensure that home ownership is a realistic scenario for you within the next decade or so. For example, if you dive into FHSA contributions straight out of high school, at 18 years old, you’ll need to be prepared to purchase your first home by 33 years old.
Another scenario to keep in mind is what happens if the FHSA account owner dies. Spouses and common-law partners can be named as the successor holder — if they meet the FHSA eligibility requirements — to maintain the account’s tax-exempt status, but no contributions or transfers can be made to the FHSA after the account holder’s death. . You can start saving now and keep your FHSA open for up to 15 years or until the year you turn 71. If you don’t end up buying a home by the end of that period, you have the option to transfer your entire savings — without paying taxes — to an RRSP or RRIF. This means you have until December 31 of the year in which you either reach the 15th anniversary of your account opening or turn 71 to use your FHSA to purchase your first property.
“We reinvest 30% of our net income into our members and communities. Every dollar, every tap, and every swipe contribute to creating a cleaner and fairer world.” Tina Cheung, Vancity wealth advisor
We can help with your unique home buying needs.
Once you decide that the FHSA is right for you, the Vancity team is here to guide and support you — but we go beyond just helping you open the account. “We can assist you with cash-flow budgeting and provide insight into your lending capacity based on your current financial situation,” says Vancity wealth advisor Tina Cheung. “We can also help devise a plan for reaching your down-payment goal.”
When you contribute your money in an FHSA with Vancity, you’re also supporting the values you care about, such as financial inclusion, affordable-housing creation, green builders and local entrepreneurs. “We reinvest 30% of our net income into our members and communities,” Cheung says. “Every dollar, every tap, and every swipe contribute to creating a cleaner and fairer world.”
Our Ultimate Guide for First-Time Homebuyers in BC is a great place to start if you’re still figuring out what kind of down payment you need and the size of mortgage you can afford. From there you’ll have a clearer idea of how much money you could be investing in an FHSA to reach your goal of owning your first home.
I’m ready to do this! How do I open my FHSA account?
You can open your FHSA at a Vancity branch, where your funds will be invested in a Jumpstart High Interest Savings Account. Or, you can work with a Vancity wealth advisor to invest the funds in investment products that align with your values and financial goals.
If you’re not yet a Vancity member, transferring your FHSA from another financial institution is as simple as completing a transfer form.
Visit vancity.com/invest/FHSA to learn more, or talk to one of our trusted wealth advisors at your local branch. It’s never too late to start saving, and the best time to start is now.
The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities.
