After setting up your budget and obtaining a mortgage pre-approval, have you considered the financial benefits offered by various governments for first-time homebuyers?
Here are some tips to help you reach your goal while easing financial concerns.
1. Contribute up to $40,000 with the FHSA*
The First Home Savings Account (FHSA) is a powerful tool for first-time buyers. You can contribute up to $8,000 per year, with a lifetime maximum of $40,000. Your savings can grow tax-free, increasing the total amount available for your home purchase. Contributions are tax-deductible:
- Investment income is tax-free
- Eligible withdrawals are tax-free
You can combine the FHSA with the Home Buyers’ Plan (HBP) to accumulate over $100,000 (or $200,000 for a couple) toward your purchase.
2. Withdraw up to $60,000 through the HBP*
Under the Home Buyers’ Plan (HBP), you can withdraw up to $60,000 (or $120,000 per couple) from your RRSP to fund your down payment, without paying tax or interest. Normally, this amount must be repaid over 15 years, starting the second year after withdrawal.
For withdrawals made between January 1, 2022, and December 31, 2025, the first repayment can be deferred until the fifth year after joining the HBP.
Annual repayments must be made to your RRSP but are not tax-deductible.
If you don’t have enough in your RRSP, you could consider the “90-day borrowing strategy” to access the HBP without existing RRSP funds.
Additional advantage: Increasing your down payment could reduce or even eliminate mortgage insurance costs (CMHC or Sagen), especially if your down payment reaches 20%.