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A Guide to Canada’s Home Buyers’ Plan (HBP) and First Home Savings Account (FHSA)

This blog post will explore two government programs designed to help Canadians achieve the dream of homeownership: the Home Buyers’ Plan (HBP) and the First Home Savings Account (FHSA).

Using Your RRSP for a Down Payment: The Home Buyers’ Plan (HBP)

The HBP allows first-time homebuyers to withdraw up to $35,000 per person (or $70,000 for a couple) from their Registered Retirement Savings Plan (RRSP) to use for a down payment on a qualifying home. Remember, these funds must be repaid within 15 years.

Here’s what you need to know about eligibility for the HBP:

  • You must be a resident of Canada throughout the process, from withdrawing funds to occupying the home.
  • You must be a first-time homebuyer or buying for a disabled person.
  • You need a written agreement to purchase or build a home in Canada.
  • You plan to occupy the home as your principal residence.

Important Things to Remember About HBP Withdrawals:

  • There’s a deadline! Withdrawals must be made within the same calendar year and used towards a home purchase by October 1st of the following year.
  • The funds withdrawn are not taxed, as long as you stay within the contribution limit and repay the amount within the timeframe.
  • Repayments start in the second year after the withdrawal.

First Home Savings Account (FHSA): A Tax-Sheltered Savings Option

The FHSA is a relatively new option for first-time homebuyers.  It allows you to save money towards a down payment in a registered account where your contributions can grow tax-free.  The lifetime contribution limit is $40,000.

Key Points About FHSAs

  • You must be a resident of Canada and at least 18 years old to open an FHSA.
  • Contributions made to your FHSA are tax-deductible, potentially lowering your income tax.
  • There is a yearly contribution limit, and exceeding this limit can result in penalties.
  • Funds withdrawn from your FHSA to purchase a qualifying home are not taxed.

We’re Here to Help!

Navigating homeownership programs and tax implications can be complex. This blog post is intended as a starting point. We highly recommend reaching out to a professional mortgage broker, such as Chris Marriner, before making any decisions about the HBP or FHSA.

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