First Home Savings Accounts

99% of the people that are reading this already own a home, so this information doesn't apply to you however if you have children or grandchildren I cannot stress enough how game-changing a First Home Savings Account can be for young people trying to save for their first home.

The First Home Savings Account (FHSA) is specifically designed to help first-time homebuyers save for their down payment without having to pay taxes on the interest earned on their savings.

This means that the interest earned on the savings in the account is not taxed, nor are withdrawals from the account. Plus, since your contributions to this account are not taxed, your money will have the opportunity to grow faster in an FHSA than a traditional savings account. Unlike a regular Tax Free Savings Account or an RRSP, a FHSA lets you beat the taxman on both the contributions and the withdrawals.

If you are interested in creating a FHSA, there are a few things to note:

• This savings account is eligible to Canadian residents who are at least 18 years of age.

• You are a first-time homebuyer - you and/or your spouse or common-law partner have not owned a home where you lived in the year in which you open the account or at any time in the previous four years.

• Allows you to contribute tax-free for up to 15 years.

• The maximum contribution is $8,000 annually, plus up to $8,000 of your unused contribution room*.

• Maximum lifetime contribution limit is $40,000.Setting up automatic contributions can help you stay on track.

*You can carry forward any unused FHSA contribution room from the prior years up to a maximum of $8,000 (subject to your lifetime contribution limit of $40,000). Therefore, if you contribute less than $8,000 in a given year, you can contribute the unused amount in a subsequent year in addition to the $8,000 annual contribution limit for that year.

Another thing to consider is combining the First Home Savings Account (FHSA) with the Home Buyers’ Plan (HBP) to help you purchase a qualifying home. The Home Buyers’ Plan (HBP) allows you to withdraw up to $35,000 from your RRSP to buy a home. Keep in mind, you will need to repay the amount you draw for the Home Buyers’ Plan within 15 years back to your RRSP.

If you are interested in setting up an FHSA or learning more, reach out to me today!

patrick@teamdugganmortgage.com

FSRA Brokerage Licence #13080

Tel: 905-299-4665