How To Apply For The First-Time Home Buyer Savings Account?

Hand placing stacks of coins in ascending order next to a wooden house and a plant in a coin jar.

With property rates at their all time high, many first-time home buyers are reconsidering their decision to buy a home. Saving for a down payment itself has become an issue among the rising living costs. To combat this, the Canadian government recently introduced the First-Time Home Buyer Saving Account, which replaces the First-Time Home Buyer Incentive Program. It is designed for first home buyers to save money quickly and without having to pay taxes on that amount. Let’s talk more. 

What is the First-Time Home Buyer Savings Account (FHSA)? 

The FHSA is a registered savings plan designed to help first-time home buyers save for their first house tax-free, within set contribution limits. Buyers can save up to $8,000 yearly tax-free and any unused room can be carried forward to the next year. You can invest a maximum of $40,000. If you and your partner are saving together for your first home, then you have a total contribution limit of $80,000. This account combines the benefits of both RRSPs and TFSAs, allowing tax deductions on contributions and tax-free withdrawals for home purchases.

Who is eligible for open FHSA? 

  • Must be a resident of Canada at the time the account is opened
  • Must be at least 18 years old 
  • Cannot have lived in a home that you have owned, or that was owned by your spouse or common-law partner, in the year of opening the FHSA or during the previous four years

bank account written on top of piggy bank on a black background.

Where can I open a FHSA in Canada? 

  • National Bank: Simply schedule an appointment 
  • EQ Bank: Available online as part of their investing account
  • Royal Bank of Canada: available through RBC Direct Investing and RBC InvestEase via online or in-person appointment 
  • Scotiabank: Available as part of their Savings Accelerator Account
  • Questrade: Available as part of their self-directed investments lineup
  • Wealthsimple: Available as part of their managed investing account or self-directed investing account

Are there any Over-Contribution Penalties? 

Yes, if you go over your individual $40,000 limit, you will be charged 1% tax per month on the excess amount. Do not go over the amount and instead save your extra money in an RRSP as the penalty is counteractive to your savings goal. 

How to Close the Account? 

The FHSA is designed to be used for purchasing a first home; therefore, it must be closed within a year of the first withdrawal, or if not used for purchasing a home, it needs to be closed within 15 years of opening or by the end of the year you turn 71, whichever comes first. Funds not used for a first home purchase can be transferred to an RRSP or RRIF or taken as cash, with the latter option being subject to taxation.

Can I open multiple FHSAs? 

Yes, you can open multiple FHSAs at separate banks but you can only contribute up to $8,000 combined across all accounts. Any interest and profit you make is yours to keep and not taxed when you use the funds towards buying a house. 

Visit the Canada Revenue Agency site for detailed information.

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