What you need to know as a First Time Home Buyer
As it becomes more challenging for first time home buyer you need to take advantage of programs designed to assist you when buying your first home.
The government says a first-time home buyer buy definition is a person who does not occupy a home currently this year and for the previous three years prior. So, you may have been a homeowner is the past and still qualify as long as it meets the rules laid out by the government. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan/participate-home-buyers-plan.html
One such program is the FHSA (First Home Saving account). https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account.html
In my opinion it may very well be the best tool to help as it like a hybrid of the First Time HBP RRSP and the TSFA (tax free saving account).
What I mean buy that is you get a tax deduction for your contribution much like you RRSP but when you take your funds out to purchase your home the money is withdrawn tax tree similar to the TSFA. Thus, it’s a double advantage for you when purchasing your initial residence.
Other important information you need to know the Maximum contribution pre year is $8000 and the combination of all your contributions is $40,000 in total.
So, if you manage to put in $8000 a year you would hit your max after five years. However, if you can’t afford the full eight, you can take long as you like to contribute until you reach the $40,000 maximum.
Another important thing to understand is that you can in fact use both programs in conjunction with each other. So, you can use the FHSA with the First Time HBP RRSP you could have as much as 40,000 from FHSA and $35,000 from FTHBP RRSP totalling $75,000 per person, this will go a long way to helping you buying your first home.
Now things to consider if you started with the FTHB RRSP plan and you don’t have the funds to contribute into the new FHSA you can in fact transfer from you RRSP to the FHSA. Why is this a suitable choice? Well, both are tax effective meaning they give you an income tax break as discussed earlier but where the FTHB RRSP has to be paid back where the FHSA does not. Hence, if your budget is limited, you can economize on upcoming expenditures.
All in all, it is challenging when trying to buy your first home and with pricing in homes going up as much as they have its a good idea to start saving money for you down payment earlier and why not save it in a program that can reduce your taxes thus giving you additional savings.
In the end if it turns out that you don’t buy a home and don’t use the First Home Savings Account it can be converted into a RRSP for retirement.
Keep in mind, working with a mortgage broker can open doors that financial institutions like the major Bank in Canada, cannot. Feel free to call us at Key Mortgage Partners to learn more.
As it becomes more challenging for first time home buyer you need to take advantage of programs designed to assist you when buying your first home.
The government says a first-time home buyer buy definition is a person who does not occupy a home currently this year and for the previous three years prior. So, you may have been a homeowner is the past and still qualify as long as it meets the rules laid out by the government. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan/participate-home-buyers-plan.html
One such program is the FHSA (First Home Saving account). https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account.html
In my opinion it may very well be the best tool to help as it like a hybrid of the First Time HBP RRSP and the TSFA (tax free saving account).
What I mean buy that is you get a tax deduction for your contribution much like you RRSP but when you take your funds out to purchase your home the money is withdrawn tax tree similar to the TSFA. Thus, it’s a double advantage for you when purchasing your initial residence.
Other important information you need to know the Maximum contribution pre year is $8000 and the combination of all your contributions is $40,000 in total.
So, if you manage to put in $8000 a year you would hit your max after five years. However, if you can’t afford the full eight, you can take long as you like to contribute until you reach the $40,000 maximum.
Another important thing to understand is that you can in fact use both programs in conjunction with each other. So, you can use the FHSA with the First Time HBP RRSP you could have as much as 40,000 from FHSA and $35,000 from FTHBP RRSP totalling $75,000 per person, this will go a long way to helping you buying your first home.
Now things to consider if you started with the FTHB RRSP plan and you don’t have the funds to contribute into the new FHSA you can in fact transfer from you RRSP to the FHSA. Why is this a suitable choice? Well, both are tax effective meaning they give you an income tax break as discussed earlier but where the FTHB RRSP has to be paid back where the FHSA does not. Hence, if your budget is limited, you can economize on upcoming expenditures.
All in all, it is challenging when trying to buy your first home and with pricing in homes going up as much as they have its a good idea to start saving money for you down payment earlier and why not save it in a program that can reduce your taxes thus giving you additional savings.
In the end if it turns out that you don’t buy a home and don’t use the First Home Savings Account it can be converted into a RRSP for retirement.
Keep in mind, working with a mortgage broker can open doors that financial institutions like the major Bank in Canada, cannot. Feel free to call us at Key Mortgage Partners to learn more.