What you should know about the First Home Savings Account (FHSA)

The Government of Canada recently introduced the First Home Savings Account, or FHSA, to help first-time home buyers break into the housing market. As a new product, it’s important to review the basics to understand if it might be right for you. Here’s what you need to know about this account!

What is the First Home Savings Account?

The FHSA is the newest tool from the government designed to help new home buyers enter the market. It allows you to save up for a home using tax-free savings you collect in the account until you are ready to use it. Users can contribute up to $8000 each year until they reach $40,000, which is the account’s limit. This money is meant to be withdrawn from your account and used to help purchase your first home. Contributions that you make are generally deductible on your income tax and benefit return. 

Who is it for?

The FHSA is only for first-time home buyers. The point of the account is to help new buyers break into the market by giving them a place to store savings in a place where they won’t be taxed, and can be accessed at any point. A first-time home buyer is someone who has not owned a home in the past four years. Spouses and common-law partners are not able to share an account with the user, so only the person who owns the account can make contributions. Finally, users must be Canadian citizens or permanent residents between the ages of 18 and 71. 

When do you have to use it?

Of course, there are some limits to this account to be aware of before signing up. If you want to use this account, you need to withdraw your savings from it within 30 days of taking ownership of your first property. The home you purchase must be your primary residence within one year of buying or building it. You also need to use the account within 15 years of opening it. This means if you reach the 15 year mark and have not withdrawn your savings, you will either have to withdraw the amount and declare it as taxable income for the year, or move the money to an RRSP. 

Canadians were technically allowed to open a Tax-Free First Home Savings Account (FHSA) starting April 1, 2023, but the country’s biggest banks won’t be offering the account to customers until later this year. 

Contact a broker before you buy!

As always, we recommend getting in touch with a mortgage broker if you have any questions about buying a home. As mortgage professionals, we can help you understand your options and whether an FHSA is right for you. This is likely going to be a popular product among new home buyers, and will be beneficial for many future home owners. However, it’s still best to discuss your situation with a professional before making any moves! We’re here to ensure your journey into homeownership is a smooth one. 

If you have any questions about your mortgage or setting up an FHSA, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.