We talk a lot about saving more to eventually buy a home, but rarely about two tools the Canadian government designed specifically for this. Combined, they can give you up to $100,000 tax-free toward the down payment on your first home. If you're buying with a partner, that's up to $200,000 between the two of you. Here's how each one works.
The FHSA is an account designed solely for buying your first home. You can contribute up to $8,000 a year, up to a lifetime maximum of $40,000. If you don't use your full annual limit, the unused room carries forward to the next year.
What makes it special is that it combines the best of two accounts you're probably already familiar with. When you contribute money, your taxes go down, just like an RRSP. And when you withdraw the money to buy your first home, you don't pay tax on that withdrawal, just like a TFSA. It's essentially a way for the government to help you save for your home without being taxed at any point in the process.
The HBP works differently. Instead of being a new account, it lets you use money you already have saved in your RRSP. You can withdraw up to $60,000 from your RRSP, tax-free, toward the down payment on your first home. The condition is that you have up to 15 years to repay that money to your RRSP, interest-free.
Here's the part most of my clients didn't know. The FHSA and the HBP can be used together, for the same purchase. That means you can gather $40,000 from the FHSA plus $60,000 from the HBP, that's $100,000 per person, tax-free. If you and your partner buy together and each use your own accounts, you could reach $200,000 between the two of you.
For both tools, you're generally considered a first-time buyer if you haven't owned the home you lived in during the last 4 years. This applies more often than people think, even if you owned a property at some point several years ago.
Yes. Both programs can be combined for the same purchase, giving you access to a larger amount for your down payment.
No. The money you withdraw from the FHSA to buy your first home doesn't get repaid, since the contributions and growth of the account are designed exactly for that. HBP money does get repaid, over up to 15 years.
Then you're very likely to qualify as a first-time buyer for both programs.
If you want to know exactly how much you and your partner could gather, send me an email with your question at contact@nataliarendon.ca, or I'll see you at the free seminar "From Renter to Homeowner: How to Buy Your First Home in Canada".