[et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”55px||||false|false” global_colors_info=”{}” custom_margin__hover_enabled=”off|desktop” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on” da_disable_devices=”off|off|off”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” width=”95%” max_width=”100%” custom_margin=”||-24px||false|false” custom_padding=”55px||||false|false” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][wahi_breadcrumb _builder_version=”4.20.2″ _module_preset=”default” global_colors_info=”{}”][wahi_breadcrumb-link title=”Real Estate 101″ _builder_version=”4.18.0″ _dynamic_attributes=”link_option_url” _module_preset=”default” link_option_url=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9saW5rX3VybF9wYWdlIiwic2V0dGluZ3MiOnsicG9zdF9pZCI6IjcyMiJ9fQ==@” global_colors_info=”{}”][\/wahi_breadcrumb-link][wahi_breadcrumb-link title=”Invest” _builder_version=”4.20.2″ _dynamic_attributes=”link_option_url” _module_preset=”default” link_option_url=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9saW5rX3VybF9wYWdlIiwic2V0dGluZ3MiOnsicG9zdF9pZCI6IjI5NDcifX0=@” global_colors_info=”{}”][\/wahi_breadcrumb-link][\/wahi_breadcrumb][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”12px||12px||false|false” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _dynamic_attributes=”content” _module_preset=”default” header_font_size=”3.5rem” header_line_height=”4.5rem” header_font_size_tablet=”42px” header_font_size_phone=”3rem” header_font_size_last_edited=”on|phone” header_line_height_tablet=”4.5rem” header_line_height_phone=”3.2rem” header_line_height_last_edited=”on|desktop” global_colors_info=”{}”]@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF90aXRsZSIsInNldHRpbmdzIjp7ImJlZm9yZSI6IjxoMT4iLCJhZnRlciI6IjwvaDE+In19@[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”4px||9px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][wahi_socialsharing _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][\/wahi_socialsharing][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”6px|||||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”24px” text_line_height=”1.5em” custom_margin=”||15px|||” global_colors_info=”{}”]<\/p>\n
New program aims to help first-time buyers get into the market.<\/span><\/p>\n<\/div>\n<\/div>\n [\/et_pb_text][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”1.13rem” text_line_height=”1.18rem” custom_margin=”||5px|||” global_colors_info=”{}”]<\/p>\n By Stuart Foxman\u00a0<\/p>\n [\/et_pb_text][et_pb_post_title title=”off” author=”off” date_format=”M j” categories=”off” comments=”off” featured_image=”off” _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_post_title][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” width_tablet=”” width_phone=”100%” width_last_edited=”on|phone” max_width_tablet=”” max_width_phone=”100%” max_width_last_edited=”on|phone” custom_padding=”21px||47px||false|false” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_image src=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9mZWF0dXJlZF9pbWFnZSIsInNldHRpbmdzIjp7fX0=@” align=”center” force_fullwidth=”on” _builder_version=”4.18.0″ _dynamic_attributes=”src” _module_preset=”default” custom_padding=”2px|||||” border_radii=”on|32px|32px|32px|32px” border_radii_tablet=”on|32px|32px|32px|32px” border_radii_phone=”on|0px|0px|0px|0px” border_radii_last_edited=”on|phone” global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”1_2,1_2″ _builder_version=”4.18.0″ _module_preset=”default” max_width=”700px” module_alignment=”center” custom_margin=”|auto|21px|auto||” custom_padding=”24px|24px|24px|24px|true|true” border_radii=”on|7px|7px|7px|7px” border_width_all=”1px” border_color_all=”#EAEAEA” global_colors_info=”{}”][et_pb_column type=”1_2″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n [\/et_pb_text][\/et_pb_column][et_pb_column type=”1_2″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_line_height=”2em” global_colors_info=”{}”]<\/p>\n 5. Using an RRSP to Purchase a Home<\/a><\/p>\n 6. Making Down Payments more Manageable<\/a><\/p>\n 7. Save on Real Estate Commissions<\/a><\/p>\n 8. Calculate your Affordability<\/a><\/p>\n 9. Look at the Big Picture<\/a><\/p>\n 10. FAQs<\/a><\/p>\n<\/div>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”||40px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n It\u2019s not always easy to save for life\u2019s major goals. That\u2019s why there are special tax-friendly vehicles for putting away money for retirement (RRSP) and your children\u2019s education (RESP). But what about a tool to save for a home?<\/p>\n \u00a0–<\/b><\/span><\/p>\n A new one is coming in Canada in 2023, called the \u00a0Tax-Free First Home Savings Account<\/a><\/span>\u00a0(FHSA). The federal government introduced it in its 2022 budget, and released draft legislation for this registered plan in August. The FHSA will give Canadians the ability to save a sizeable chunk, on a tax-free basis, towards buying their first home.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row module_id=”1″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_image src=”https:\/\/wahi.com\/wp-content\/uploads\/2022\/12\/chartvs2.png” alt=”the tax-free first home savings account fhsa” title_text=”the tax-free first home savings account fhsa” _builder_version=”4.18.0″ _module_preset=”default” border_radii=”on|32px|32px|32px|32px” global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”||40px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n This new tool combines the tax break features of both an RRSP and a Tax-Free Savings Account (TFSA), so there are advantages going in and coming out. Just as with an RRSP, contributions will be tax-deductible. And as with a TFSA, any withdrawals, including the growth of investment income, will be non-taxable.<\/p>\n \u00a0–<\/span><\/p>\n The FHSA will have an $8,000 annual contribution limit, with a lifetime cap of $40,000. \u201cEvery little bit helps,\u201d says Andrew Perrie, a REALTOR\u00ae at Revel Realty Inc. in Niagara-on-the-Lake.<\/p>\n \u00a0–<\/span><\/p>\n \u201cThis tax-free shelter for buyers\u2019 hard-earned money will help bring back confidence for individuals looking to get into the market,\u201d Perrie continues. \u201cBeing able to put away $8,000 annually in a secured tax-free account is quite substantial for first-time homebuyers. Knowing they can access this when an opportunity to get into the housing market arises is huge.\u201d<\/p>\n \u00a0–<\/span><\/p>\n An FHSA is available to people who are at least 18, a resident of Canada, and who haven\u2019t owned a home in the year that the account opens or the previous four calendar years. This applies to primary residences only, not investment or vacation properties.<\/p>\n \u00a0–<\/span><\/p>\n Any Canadian financial institution that issues RRSPs and TFSAs (i.e. banks, trust companies, life insurance companies and credit unions) can also issue FHSAs. An FHSA can hold the same wide range of qualified investments as a TFSA, including mutual funds, publicly-traded securities, exchange-traded funds, government and corporate bonds, and guaranteed investment certificates.<\/p>\n \u00a0–<\/span><\/p>\n While the annual contribution limit is $8,000, you can carry over unused portions. That room accumulates as soon as you open an FHSA. So if you contribute, for example, $4,000 to one in 2023, you can contribute up to $12,000 in 2024 ($8,000 plus the unused $4,000 from the previous year).<\/p>\n \u00a0–<\/span><\/p>\n There\u2019s added flexibility as well. You can also hold more than one FHSA, and transfer funds between them, as long as the total amounts across multiple FHSAs don\u2019t exceed the $40,000 per person lifetime limit. You can also transfer funds from an RRSP into an FHSA (within the FHSA contribution limits). That\u2019s considered a tax-free withdrawal from an RRSP.<\/p>\n \u00a0–<\/span><\/p>\n \u201cThis will give new buyers more options when looking to save for the purchase of their first home,\u201d says Karlyn Eacrett, a Sales Representative with Keller Williams Real Estate Associates in Mississauga<\/a>.<\/p>\n [\/et_pb_text][et_pb_text module_id=”2″ _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n –<\/span><\/p>\n Canadians can keep an FHSA account open for 15 years or until they turn 71, whichever comes first.<\/p>\n \u00a0–<\/span><\/p>\n When should a prospective home buyer launch an FHSA? \u201cAs soon as possible,\u201d says Perrie. \u201cYou never know when the right opportunity presents itself, and it’s always good to get a head start.\u201d<\/p>\n \u00a0–<\/span><\/p>\n Given the annual limit, you can\u2019t fund the FHSA in one lump sum. \u201cTo take full advantage, there needs to be a savings plan set in place prior to purchasing,\u201d says Joanna Lang, a managing partner\/mortgage agent at Keller Williams Edge in Burlington<\/a>.<\/p>\n \u00a0–<\/span><\/p>\n She suggests starting an FHSA, at a minimum, five years prior to purchasing a first home. That would enable the full $40,000 of savings, in theory, if someone could max it out every year.<\/p>\n –\u00a0<\/span><\/p>\n To be strategic and make contributions hurt less, it\u2019s prudent to get time on your side. Sock away money early and, hopefully, watch it grow. \u201cGiven our current economic climate, I think an FHSA should be opened on a person’s 18th birthday to start saving,\u201d says Eacrett.<\/p>\n \u00a0–<\/span><\/p>\n \u201cI would recommend homebuyers sit down with a qualified financial advisor to help them make the most out of their savings,\u201d she adds. \u201cLow-risk investments would be a great option to consider.\u201d<\/p>\n \u00a0–<\/span><\/p>\n How are funds treated when you eventually take them out? It depends on whether they\u2019re considered qualifying (non-taxable) or non-qualifying withdrawals.<\/p>\n –\u00a0<\/span><\/p>\n An FHSA withdrawal is qualifying if you\u2019re a first-time home buyer (as defined by the program) at the time the money leaves your account. For a qualifying withdrawal, you also need a written agreement that states that you:<\/p>\n \u00a0–<\/span><\/p>\n \u00a0–<\/span><\/p>\n You can also make a qualifying withdrawal within 30 days of moving into your home.<\/p>\n \u00a0–<\/span><\/p>\n A qualifying home is any located in Canada, including a share in a co-operative housing corporation if you have an equity interest (though not if you only have a right to tenancy in the co-op unit).<\/p>\n \u00a0–<\/span><\/p>\n As long as you meet all those conditions, you can take out FHSA funds tax-free, whether in one or a series of withdrawals. Contributions to an FHSA made after a qualifying withdrawal aren\u2019t tax-deductible.<\/p>\n \u00a0–<\/span><\/p>\n What happens if you want to take out or transfer all or part of the FHSA holdings, without putting them into your first home? That depends. You can transfer FHSA savings on a tax-free basis into a TFSA, an RRSP or a Registered Retirement Income Fund (RRIF).<\/p>\n \u00a0–<\/span><\/p>\n Just remember three things. One, these transfers won\u2019t reduce \u2014 and aren\u2019t limited by \u2014 your available RRSP contribution room. Two, funds transferred to an RRSP or RRIF will be subject to tax upon eventual withdrawal. Three, these transfers won\u2019t give you back room on the FHSA\u2019s lifetime contribution limit.<\/p>\n \u00a0–<\/span><\/p>\n If you make a withdrawal without meeting the conditions, i.e., for any other purposes, that\u2019s considered non-qualifying. Those withdrawals are then added to your income, and your financial institution will collect and remit a withholding tax, as with taxable RRSP withdrawals.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” background_color=”#edf7f3″ custom_padding=”32px||32px||true|false” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on” da_disable_devices=”off|off|off”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” header_2_text_align=”center” header_2_text_color=”#38505b” header_2_font_size=”2.63rem” header_2_line_height=”3.75rem” max_width=”800px” module_alignment=”center” header_2_font_size_tablet=”32px” header_2_font_size_phone=”27px” header_2_font_size_last_edited=”on|phone” header_2_line_height_tablet=”3.75rem” header_2_line_height_phone=”32px” header_2_line_height_last_edited=”on|phone” global_colors_info=”{}”]<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”||24px||false|false” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on” da_disable_devices=”off|off|off”][et_pb_row module_id=”3″ _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”||43px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n You can borrow money to put into an FHSA, but the interest on cash borrowed isn\u2019t deductible for tax purposes, just as it isn\u2019t if you borrow to invest in an RRSP or TFSA.<\/p>\n \u00a0–<\/span><\/p>\n Is borrowing a smart strategy? Maybe for some individuals, especially those who may benefit from a larger tax refund and who have good capacity to repay the loan, says Lang. The rate of return would also have to be higher than the interest rate on the loan. But Perrie isn\u2019t a fan of borrowing for FHSA purposes.<\/p>\n \u00a0–<\/span><\/p>\n \u201cI\u00a0 wouldn’t,\u201d he says. \u201cI’m a big believer in using as less leveraged money as possible. For investors that’s different. But for something that might be someone’s first and only purchase, you want to keep your housing costs as low as possible.\u201d<\/p>\n \u00a0–<\/span><\/p>\n Eacrett agrees. \u201cHomeownership comes with many additional expenses over the years. I would advise that you go into it with the least amount of debt possible and plan for the long term,\u201d she says.<\/p>\n \u00a0–<\/span><\/p>\n The annual contribution limit applies to the calendar year. Whatever the date in 2023 that the FHSA program starts, account holders will be able to contribute the full $8,000 for the year.<\/p>\n \u00a0–<\/span><\/p>\n The tax deduction rules are slightly different than with an RRSP. With retirement savings contributions made within the first 60 days of a calendar year, you\u2019re permitted to assign those to the previous year. With an FHSA, you can\u2019t do so.<\/p>\n \u00a0–<\/span><\/p>\n However, as with RRSP deductions, you can either claim a deduction for the year when you made a contribution or carry forward the amount. So that makes sense if you push the deduction to a tax year when you\u2019re earning more.<\/p>\n \u00a0–<\/span><\/p>\n Besides contributing to your own FHSA, you can provide funds to a spouse to contribute to their own. However, only the FHSA holder can claim tax deductions.<\/p>\n \u00a0–<\/span><\/p>\n If a marriage or a common-law partnership breaks up, amounts can be transferred from the FHSA of one party to an FHSA of the other (or to their RRSP or RRIF). If you\u2019re the one transferring, it won\u2019t reinstate any contribution room; if you\u2019re the one receiving a transfer, it won\u2019t count against your contribution room.<\/p>\n \u00a0–<\/span><\/p>\n \u201cThis program is geared to encourage Canadians to have a systematic approach to saving money, consistently and over a longer period of time, towards their first home purchase,\u201d says Lang.<\/p>\n \u00a0–<\/span><\/p>\n Should people set up an FHSA even if they\u2019re unsure if they\u2019ll end up buying a home? \u201cAbsolutely,\u201d says Eacrett. \u201cIf you need the funds for a home, they’re available to you. If you decide not to buy, you add to your RRSPs. It’s a win-win. The worst case scenario would be choosing neither option and withdrawing the cash as taxable income.\u201d<\/p>\n \u00a0–<\/span><\/p>\n She says the homebuyers that the FHSA helps the most are ones who are simply looking to find their way into the housing market, using whatever means they can. That includes entry-level condo buyers, or buyers who are willing to move where prices are more affordable.<\/p>\n \u00a0–<\/span><\/p>\n \u201cI love this strategy of climbing the real estate<\/a> ladder because it gets you into the market and gaining equity until you can move onto a townhouse or semi-detached, for example,\u201d says Eacrett. \u201cFrom a financial standpoint, this approach makes the most sense, since most people are not able to save at or above the rate of inflation. This strategy takes you off the sidelines and into the game. Instead of watching real estate prices rise, you can start to build equity.\u201d<\/p>\n How far can an FHSA go towards a down payment? It depends, of course, on the purchase price of the home. First-time buyers will need a down payment of 5% to 20%.<\/p>\n \u00a0–<\/span><\/p>\n \u00a0–<\/span><\/p>\n \u201cIt’s important to note that 20% down should be the goal. Less than 20% down on your purchase will mean you must purchase mortgage insurance,\u201d says Eacrett.<\/p>\n \u00a0–<\/span><\/p>\n That makes for a large lump sum down payment. Eacrett notes that the Toronto<\/a> Housing Market Report for September 2022 reported that the average price for a condo apartment in the GTA is $731,000. Using this purchase price, a buyer would need $48,100 down. In this case, the maximum allowable amount of an FHSA could go a long way.<\/p>\n \u00a0–<\/span><\/p>\n The same report indicated that the average price for a detached home in the GTA<\/a> is $1,370,000. Since anything over $1 million requires 20% down, a buyer would be looking at a much more sizeable $274,000 down payment.<\/p>\n \u00a0–<\/span><\/p>\n FHSA holdings can make a dent on down payments, but high purchase prices, coupled with rising interest rates, do make buying a first home a stretch for many people. That makes it even more important to use the tools at your disposal to save taxes, add to your nest egg, and get into the market sooner.<\/p>\n \u00a0–<\/span><\/p>\n [\/et_pb_text][et_pb_text module_id=”4″ _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n \u00a0–<\/span><\/p>\n While Perrie welcomes the FHSA, \u201cThese types of programs, in my opinion, could always go further.\u201d Still, taking advantage of a range of other programs, incentives and strategies can help.<\/p>\n \u00a0–<\/span><\/p>\n For instance, the Canada Mortgage and Housing Corporation offers a\u00a0\u00a0First-Time Home Buyer Incentive<\/a><\/span>, in the form of a loan totaling 5% of the resale price for an existing home or 10% of the purchase price of a newly constructed home. The program has been extended until March 31, 2025.<\/p>\n \u00a0–<\/span><\/p>\n With this program, purchasers apply the loan toward the down payment, and it becomes a shared-equity investment in the property. In essence, the government offers you financing without interest. This helps to reduce your monthly mortgage payment without increasing your down payment.<\/p>\n \u00a0–<\/span><\/p>\n Program users eventually have to repay the loan, but not for some time \u2013 within 25 years of purchase or when the property is sold. The repayment will be based on the home\u2019s fair market value at that time.<\/p>\n \u00a0–<\/span><\/p>\n The government will limit its share in the rise in value of a home. Homeowners will have to pay back up to a maximum gain of 8% per year (not compounded) on the incentive amount, calculated from the date of advance to the time of repayment. This means that participants may be able to keep more when their homes increase in value.<\/p>\n \u00a0–<\/span><\/p>\n The nature of this incentive means that the government also has a shared stake in the downside of the property value, if it happens to decrease. That\u2019s up to a maximum loss equal to 8% per year (not compounded).\u202fTo be eligible for the First-Time Home Buyer Incentive, your total qualifying income must not exceed $120,000, or $150,000 if you\u2019re buying a home in Victoria<\/a>, Vancouver or Toronto.<\/p>\n \u00a0–<\/span><\/p>\n There are other conditions. The amount you borrow must not exceed four times your qualifying income, or 4.5 times if purchasing in Victoria, Vancouver or Toronto. Plus, you must be able to pay the minimum down payment with traditional funds, e.g., savings, a gift from an immediate family member or other relative, or the withdrawal\/collapse of an RRSP.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”54px||48px|||” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on” da_disable_devices=”off|off|off”][et_pb_row module_id=”5″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n Yes, a Registered Retirement Savings Plans can be a tool for homebuyers too. We think of an RRSP as a long-term strategy to help finance post-retirement life, which it is primarily. Yet RRSPs can have other uses.<\/p>\n –<\/span><\/p>\n Canada\u2019s \u00a0Home Buyers\u2019 Plan<\/a><\/span>\u00a0(HBP) lets Canadians withdraw up to $35,000 from a registered retirement savings plan to build or buy a home. So couples might be able to withdraw up to $70,000 combined, and increase their down payment by that amount, without paying any taxes on the amount.<\/p>\n –<\/span><\/p>\n The funds being withdrawn must have been in the RRSP account for at least 90 days. They also must be repaid to the RRSP, but there is plenty of time: within 15 years of the date of withdrawal, starting two years to the day. If you withdraw the maximum allowable amount of $35,000, your minimum annual repayment instalments would be $2,333 ($35,000 divided by 15 years). You can always repay more in any given year, reducing your overall annual payments.<\/p>\n –<\/span><\/p>\n There are advantages and disadvantages to using the HBP. On the one hand, withdrawing money tax-free means the plan essentially works like an interest-free loan. That can make a real difference in the affordability of your first home.<\/p>\n –<\/span><\/p>\n The ability to draw on up to $70,000 for a down payment can make the HBP \u201cmore suitable for homebuyers looking to purchase now or within the next year, since funds can be made available quickly,\u201d Eacrett says.<\/p>\n –<\/span><\/p>\n On the other hand, putting RRSP money towards a home means you\u2019re just borrowing from yourself. So you\u2019re locking yourself into a set repayment schedule (payments must go back into your RRSP account before the annual RRSP deadline). That becomes yet another fixed and recurring expense, on top of any other loans and your mortgage.<\/p>\n –<\/span><\/p>\n \u201cI see the FHSA as a better option versus the HBP,\u201d says Eacrett. \u201cThe biggest distinction is that one is a loan and the other is a registered, tax-free savings account. It will be crucial for homebuyers who use the HBP to have a clear repayment plan.\u201d<\/p>\n –<\/span><\/p>\n If you can\u2019t keep to the annual repayment schedule, your RRSP withdrawals will be taxed, which would make it a costly loan.<\/p>\n –<\/span><\/p>\n \u201cMissed or partial payments will be taxable as RRSP income, so you’d want to ensure you’re avoiding that,\u201d says Eacrett. \u201cGiven that the homebuyer is now also paying a mortgage, plus the expenses of running a household, this could put a strain on budgets.\u201d<\/p>\n –<\/span><\/p>\n Being confident in your ability to set aside the repayment amounts is just one factor in contemplating whether to use the HBP. You also have to think about whether interrupting your RRSP by tapping into funds is a wise decision for your overall financial picture.<\/p>\n –<\/span><\/p>\n \u201cConsider the loss of future growth within your RRSP on the money that was withdrawn. I sort of see it as a fix for today, a problem for tomorrow,\u201d Eacrett says. \u201cIt can be a great tool to help, but the pros and cons should be considered in advance of deciding to withdraw from RRSPs.\u201d<\/p>\n –<\/span><\/p>\n The HBP and the FHSA can\u2019t be used together, meaning you can\u2019t make withdrawals from both at the same time for the same home acquisition. So homebuyers have to plan ahead regarding<\/p>\n –<\/span><\/p>\n [\/et_pb_text][et_pb_text module_id=”6″ _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n The way you approach your down payment obligation can form another part of your strategy to get into the housing market. That\u2019s the biggest chunk to save. As noted, buyers often pay 20% as a down payment. Still, many lenders allow buyers to make down payments of as low as 5% on homes, called high-ratio mortgages. But there is one provision.<\/p>\n \u00a0–<\/span><\/p>\n Buyers with high-ratio mortgages must purchase mortgage loan insurance, also known as\u00a0mortgage default insurance.<\/a><\/span>\u00a0That insurance can then be blended with monthly mortgage payments. Three institutions offer mortgage loan\/default insurance: Canada Mortgage and Housing Corporation, Canada Guaranty and Genworth.<\/p>\n \u00a0–<\/span>\u00a0<\/p>\n Going this route means you don\u2019t need to save as much for a down payment, enabling buyers to get into the housing market that much faster.<\/p>\n \u00a0–<\/span><\/p>\n There are other ways to reduce your initial outlay. For instance, some municipalities have down payment assistance programs for qualified homebuyers. In Kitchener<\/a>, the local government will lend 5% of the property value. And Barrie<\/a>, Simcoe County will lend up to 10% of the property value (with some limits on the price of the home and the income of the borrowers).<\/p>\n In both cases, if you sell before 20 years you must pay back the same percentage of the housing value. But if you end up living in the home for more than 20 years, the loans are forgiven.<\/p>\n Perrie says various municipalities have different forms of assistance for buyers, \u201cso always start at the town level and ask what grants they offer.\u201d<\/p>\n \u00a0–<\/span><\/p>\n With everything that first-time homebuyers have to shell out, anything they can recoup makes a difference.<\/p>\n \u00a0–<\/span><\/p>\n Some refunds and incentives are available to reduce land transfer taxes (LTTs), which are municipal or provincial fees levied on a property transaction. Instead of making first-time homebuyers pay this fee in full, Ontario<\/a> offers provincial land transfer tax refunds of up to $4,000 when a home\u2019s purchase price is $368,000 or more. In Toronto, buyers are also eligible for a refund on the municipal LTT \u2013 up to $4,475 for first-time homebuyers.<\/p>\n \u00a0–<\/span><\/p>\n With the\u00a0GST\/HST new housing rebate<\/a><\/span>, buyers can also recover some of the GST or the federal part of the HST paid for a new or substantially renovated house. Different provinces have their own rebate programs; depending on the jurisdiction and conditions, you may be eligible for both the provincial and federal rebate, only the provincial rebate, or only the federal rebate.<\/p>\n \u00a0–<\/span><\/p>\n The federal government also offers a First-Time Home Buyers’ Tax Credit, which they announced this year is increasing to $10,000 (from $5,000), and which provides up to $1,500 in direct home buyer support (up from $750).<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” background_color=”#edf7f3″ global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on” da_disable_devices=”off|off|off”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” header_2_text_align=”center” header_2_text_color=”#38505b” header_2_font_size=”2.63rem” header_2_line_height=”3.75rem” max_width=”800px” module_alignment=”center” header_2_font_size_tablet=”32px” header_2_font_size_phone=”27px” header_2_font_size_last_edited=”on|phone” header_2_line_height_tablet=”3.75rem” header_2_line_height_phone=”32px” header_2_line_height_last_edited=”on|phone” global_colors_info=”{}”]<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on” da_disable_devices=”off|off|off”][et_pb_row module_id=”7″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n Another way buying a home can become more affordable is to save on commissions. The FHSA can be used in conjunction with the\u00a0Wahi price program,<\/a><\/span>\u00a0making a purchase that much more affordable for first-time homebuyers.<\/p>\n –<\/span><\/p>\n Here\u2019s how Wahi can save purchasers thousands of dollars. The standard real estate commission is 5%. Wahi felt that was too high \u2013 way too high, so it created a few ways to lower it. Through MyBuy, buyers have the option of paying for only the services they need to purchase a home, without paying for all the extras.<\/p>\n –<\/span><\/p>\n The Wahi platform has listings for all of the GTA (updated every 15 minutes), can schedule showings, and uses non-commission licensed experts and Elite Partner Realtors. Wahi also helps buyers find options for mortgages, refinancings, renewals and home equity lines of credit.<\/p>\n –<\/span><\/p>\n Through the Wahi platform, sellers also have options. For instance a home seller could save 40% of the selling commission with MySell, save 60% by selling through a Wahi auction, or pay full commission through Wahi Full Service to be matched with an Elite Partner Realtor<\/a>.<\/p>\n –<\/span><\/p>\n As a digital brokerage, the company is able to cut up to 70% of the buyer\u2019s fee off every sale and pass those savings back. For an average buy, this would come to around 1.5% of the total price paid. And for an average property in the Greater Toronto Area, this would mean about $20,000 back to the purchaser. Homebuyers get their payment two weeks after the closing of their property.<\/p>\n –<\/span><\/p>\n [\/et_pb_text][et_pb_text module_id=”8″ _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n –<\/span><\/p>\n For first-time homebuyers, there\u2019s a lot that goes into their calculations. Programs like Wahi\u2019s, the First Home Savings Account and other incentives can all help. But you also have to carefully crunch the numbers to determine what you can afford to spend.<\/p>\n –<\/span><\/p>\n To determine that, figure out your mortgage affordability. That ties into several factors. Here are four big ones that lenders will look at.<\/p>\n –<\/span><\/p>\n –<\/span><\/p>\n –<\/span><\/p>\n –<\/span><\/p>\n –<\/span><\/p>\n Weigh other factors when calculating how much house you can afford, like the property taxes and the upfront\u00a0closing costs<\/a><\/span>\u00a0(legal and administrative fees, sales tax, home inspection fee, property appraisal fee, mortgage default insurance fee, land transfer tax, moving costs, etc.). Closing costs could amount to 2% of the purchase price. Whether you\u2019re looking at the one-time expenses or ongoing property taxes, they all have to be budgeted.<\/p>\nGo to Section:<\/strong><\/h3>\n
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Go to Section:<\/strong><\/span><\/h3>\n
When to Open an FHSA<\/h2>\n
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“An FHSA is available to people who are at least 18, a resident of Canada, and who haven\u2019t owned a home in the year that the account opens or the previous four calendar years. This applies to primary residences only, not investment or vacation properties.”<\/h2>\n
Should you Borrow Money to put into an FHSA?<\/h2>\n
Regardless of your Buying Plans, FHSA can be a Win-Win<\/h2>\n
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Other Programs and Incentives for First-Time Homebuyers<\/h2>\n
Using an RRSP to Purchase a Home<\/h2>\n
Making Down Payments more Manageable<\/h2>\n
“FHSA holdings can make a dent on down payments, but high purchase prices, coupled with rising interest rates, do make buying a first home a stretch for many people. That makes it even more important to use the tools at your disposal to save taxes, add to your nest egg, and get into the market sooner.”<\/h2>\n
Save on Real Estate Commissions<\/h2>\n
Calculate your Affordability<\/h2>\n
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