Within the past few weeks and months, we have seen thehousing market begin to stabilize, and rates have remained steady. In manymarkets, house prices are getting competitive once again with prices increasingor buyers finding themselves in a multiple offer situation. If you or someoneyou know is looking to purchase a home before prices rise too much, read on.
By now, most Canadian’s know we are unlikely to ever seeinterest rates as low as we did during COVID, and the housing market isunlikely to correct much further given Canada’s current economic forecasts.This is giving many buyers a nudge to re-enter the market. Thankfully, thefederal government has recently introduced a new program to help first-timehome buyers to save for their first purchase: the First Home Savings Account(FHSA).
The FHSA is a registered plan that allows you to save up to$40,000 in a tax-free account, to be used for a first-home purchase. You arepermitted to contribute up to $8,000 per year and deduct your contributions fromyour taxable income, in the same way you would RRSPs. Also like RRSPs, you areable to carry forward unused contribution room into the following year. Anyinterest accumulated inside the plan is then tax-free. When you are ready tobuy your first home, you can withdraw your savings tax-free, in the same wayyou would use a TFSA account. While $40,000 may not seem like enough for a downpayment, in many markets, there are also additional programs that you canleverage, which could mean the difference between buying a home, or not.
The FHSA complements the existing Home Buyer’s Plan (HBP)which allows you to withdraw up to $35,000 from your RRSPs to buy or build aqualifying home. You are permitted to use both programs together, ultimatelyboosting your savings and reducing your taxes. The reduction in taxes can makesaving to max out these programs easier, and is an important part of theprogram.
Who is eligible?
· Canadian residents, aged 18or older.
· Never owned a home or livedin a home owned by your spouse or common-law partner in the past four years.
· Have a written agreement tobuy or build a qualifying home for yourself or for a related person with adisability.
· Property is intended to beoccupied as your primary residence within one year of buying or building it.
If you think this program might be a fit for you or someoneyou know, please contact one of our Mortgage Advisors to discuss how we canutilize the new FHSA program and the existing HBP to get you into your firsthome.
The FHSA is now open to all that qualify, so you can startreaping the tax benefits right away. If you are interested in learning more orcurious about how it can help you, contact us today.