Building Your Foundations with the First Home Savings Account

It’s not an easy time right now to buy your first home. Interest rates are still higher than they were at the beginning of the decade, and housing prices are too. Saving up for a down payment can feel overwhelming, but I have some good news for you. The relatively new First Home Savings Account (FHSA) is a great option if you want to make your dollars go further as you build towards that major purchase.  

Tax Deductible and Tax-Free!? 

Every registered account has a purpose, and the FHSA is no different. It’s specifically targeted at first time home buyers—though more people fall into that category than you think (I’d recommend you look at the FHSA requirements to see if you qualify). These accounts are designed to make saving up for your down payment easier, and they can be powerful tools.   

Similar to an RRSP contribution, an FHSA contribution gives you a deduction against your income on your tax return. That’s helpful in and of itself. But unlike with an RRSP, if the funds you take out of your FHSA are used as a down payment, then they also come out of the account tax free.  

Typically, registered accounts have an upside and a downside, and you need to determine whether using them is worthwhile for you. When it comes to the FHSA, if you use it the right way, it’s all upside. You don’t need to worry if you don’t end up buying a home—you can transfer the funds to an RRSP down the road. It’s really the Cadillac of registered accounts.  

How Do I Even Use This Thing? 

Broadly speaking, if you’re planning on buying a house in the next five years, you’ll likely be using your FHSA primarily for the tax deduction. Investing within the account during this period would be unwise as markets are not reliable at producing returns over the short term. If you’re further out from your purchase, then you can still benefit from an account. One of the other advantages is that funds grow tax free within your FHSA.  

Accounts can be opened through a broad range of financial institutions, from banks to brokerages and insurance companies. If you’re a do-it-yourself investor, self-directed FHSAs can be a great option. No matter what you choose, it’s important to consider your time horizon, your risk tolerance, and your objectives. You can invest, or not invest, accordingly. 

Part of a Balanced Homebuying Strategy 

The FHSA isn’t the only tool in your homebuying toolbox, though it’s one of the most powerful. There are other programs, like the Home Buyers’ Plan, which is available through your RRSP and allows you to withdraw funds for a down payment tax free with a repayment over time. Other supports include the following: 

• Loan guarantees for a down payment from provincial governments where available 
• Tax refunds on HST/GST 
• Local incentives from your municipality and/or province.  

There’s a broad range of programs that can make purchasing a home easier in your local area.  

No matter where you are on the road towards buying your first home, you should take a look at a First Home Savings Account. Odds are, it’ll give you a helpful boost, help you reach your goals, and make that big step a little less daunting.  

There’s No Need to Go It Alone 

Your contribution room accrues when you open the FHSA, so the way you use the account may vary depending on your circumstances and how far into the future a home purchase is for you. Having an expert like a Certified Financial Planner^® professional or Qualified Associate Financial Planner™ professional to guide you can ensure you’re setting yourself up for success and getting the most out of this powerful tool.  

Creating a tailored financial plan can help you start making progress toward buying your first home. To get started, connect with a local CFP^® professional or QAFP^® professional by visiting the Find Your Financial Planner tool. 

Laura Whiteland is a CFP professional and the owner of Inclusive Financial Planning .