Ready to get out of the rental rat race? Buying your first home can seem like a daunting task. Fortunately there are measures, including the new First Home Savings Account, that aim to make home ownership more attainable for more Canadians.
In most major Canadian cities, the supply of available homes for sale remains low and higher interest rates have barely put a dent in home prices in most Canadian markets.
For many Canadians, especially first time home buyers, home ownership may seem out of reach. All levels of government are looking at measures to try and address home affordability across Canada. In Alberta, there are a number of homebuyer programs and incentives, with a few new measures announced just this year, including the First Home Savings Account (FHSA).
The nice thing about the FHSA is that it combines tax-deductible contributions (like an RRSP) with tax-free withdrawals (like a TFSA). Find out how the First Home Savings Account (FHSA) can help you save for your first home.
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What is the First Home Savings Account?
Starting April 1, 2023, eligible Canadians can invest in a first home savings account (FHSA) which is a registered plan that allows prospective first-time home buyers to save for their first home tax-free. You are allowed to contribute a total of $8,000 annually, up to a maximum account value of $40,000 total.
There are three types of FHSAs that can be offered:
- A depositary FHSA: An account (with a financial institution) that holds money, term deposits, or guaranteed investment certificates (GICs)
- A trusteed FHSA: A trust (with a trust company as trustee) that holds qualified investments such as money, term deposits, GICs, government and corporate bonds, mutual funds, and securities listed on a designated stock exchange
- An insured FHSA: An annuity contract (with a licensed annuity provider)
Who is eligible for an FHSA?
To qualify for an FHSA, you must be 18 years of age or older, a resident of Canada, and a first-time home buyer.
To be considered a first-time home buyer you must not have lived in a qualifying home at any time in the current calendar year before the account is opened or at any time in the preceding four calendar years as your principal place of residence that you either owned or jointly owned with your spouse or common-law partner.
How can I open an FHSA?
An FHSA can be issued by a bank, credit union or a trust or insurance company. The issuer will advise on the types of FHSAs and qualified investments they can contain. The types of investments that qualify for FHSAs are generally similar to those that qualify for RRSPs.
The issuing institution will need your social insurance number, your date of birth, and any supporting documents required to certify that you are a qualifying individual.
How to withdraw an FHSA?
As long as the withdrawal meets the criteria of a qualified withdrawal, the amount withdrawn will not be considered taxable.
A qualifying First Home Savings Account withdrawal must meet all of the following conditions:
- you must fill out Form RC725, Request to Make a Qualifying Withdrawal from your FHSA and give it to your FHSA issuer
- you must be a first-time home buyer
- you must have a written agreement to buy or build a qualifying home with the acquisition or construction completion date of the qualifying home before October 1 of the year following the date of the withdrawal
- you must not have acquired the qualifying home more than 30 days before making the withdrawal
- you must be a resident of Canada from the time that you make your first qualifying withdrawal from one of your FHSAs until the earlier of the acquisition of the qualifying home, or the date of your death
- you must occupy or intend to occupy the qualifying home as your principal place of residence within one year after buying or building it
For all details and rules, visit Canada.ca
Home affordability in Edmonton
Fortunately, Edmonton still represents one of the more affordable markets in the country. According to the Canadian Real Estate Association (CRE), Edmonton’s average home price (HPI benchmark) was $373,000 in April 2023, which is considerably less than the national average which was $716,083 for the same month.
With a range of affordable single family homes, duplexes, townhomes and condos for sale in great, family-friendly neighbourhoods, Edmonton is an excellent choice to invest in home ownership.
Buying your first home? With nearly 20 years of experience in the Edmonton market, Wally has helped hundreds of first-time buyers navigate the process with ease.
Call/text Wally at 780.238.7384 to get started.