Homeownership is a dream for many Canadians. Fortunately, several savings programs have been introduced to make this dream more accessible. Here is an overview of the three main ones: the FHSA, the RRSP Home Buyers’ Plan, and the TFSA.
The FHSA: A dedicated account for buying your first home
The FHSA is a program specifically designed for first-time homebuyers. This savings account allows you to contribute up to $8,000 per year, with a lifetime limit of $40,000. Contributions are tax-deductible, and investment growth is tax-free if the funds are used to purchase your first home. This program therefore allows you to save while benefiting from tax advantages, without having to repay the funds once you have reached your home-buying goal.
The HBP: Using your RRSP to finance your home purchase
The Home Buyers’ Plan (HBP) allows you to withdraw up to $60,000 per person ($120,000 for a couple) from your RRSP to buy your first home. This amount is tax-free but must be repaid over 15 years, with at least one-fifteenth of the total repaid each year. Since 2024, a temporary relief measure allows borrowers to defer the start of repayments by three years for withdrawals made between 2022 and 2025. Starting in 2026, the deferral period will return to two years.
The TFSA: Flexibility and tax advantages for all projects
The TFSA is a flexible savings account that allows you to contribute up to $7,000 in 2025, with both investment gains and withdrawals being tax-free. Since its introduction, the cumulative contribution room has reached $102,000. Unlike the FHSA and the HBP, there are no restrictions on how the funds are used, making it an excellent tool for saving for various goals, including buying a home. This program requires no repayment and offers great flexibility in managing your finances.
The importance of consulting a mortgage broker
Working with a mortgage broker can greatly simplify your journey toward buying your first home. They can help you understand the different financing options, assess your borrowing capacity, and choose the mortgage that best fits your needs. With the expertise of a professional, you can make informed decisions and improve your chances of successfully completing your real estate project.