How First Time Buyers in the Okanagan Valley Can Secure a down payment Through Canada’s New First Home Savings Account (FHSA) Program
As a first time home buyer on the hunt for a home in the Okanagan Valley and BC Southern Interior you have been following news about local area real estate. And if so, you may have been left feeling less than enthusiastic regarding higher (than they have in the last 5 years) variable and fixed mortgage rates. You’ve also read about limited housing inventory in our in-demand resort communities. While things are finally trending in your favor after the last announcement regarding the prime rate, there is one new development that has given new buyers a chance to celebrate – the arrival of the federal government’s tax-free First Home Savings Account (FHSA) program.
The FHSA program launched on April 1 (2023) and is for those of you in-search of your starter home. Below is a breakdown of what you need to know about this exciting opportunity to secure a downpayment on your first real estate purchase.
The FHSA Helps You Build Your Down-payment
The federal government initiative was launched to help first time buyers afford to buy a property in spite of Canada’s competitive housing market which has driven up home values. This is more necessary in BC than anywhere else in the country.
The FHSA is a registered savings account that allows households to contribute up to $8,000 a year to a lifetime limit of $40,000. It is permitted to run over the course of 15 years, or by the time you turn 71 (whichever is soonest).
You are not required to cough up an entire $8,000 per annum to contribute, as you can make smaller contributions one year and make it up with a larger one the next. For instance, if you begin your FHSA today you may contribute $6,000 for 2023, then $10,000 in 2024 as able and desired.
Furthermore, contributions made to the FHSA are tax deductible and your withdrawals are tax-free. FHSA Investment gains are also tax-free. This is all music to the ears of anyone who fears the wrath of the CRA.
Even better, is that households can open more than one account with more than one financial institution. This is possible as long as total contributions don’t surpass the annual and lifetime limits.
Simply put, the FHSA offers households a better way to accrue funds for a down-payment without the tax penalties associated with other similar investments. You’ll secure the required down-payment in a shorter amount of time and without consequence.
The following conditions to using your FHSA to put towards a down-payment on your first home are as follows:
Your property was acquired within 30 days before making the withdrawal from the FHSA.
You have a contract or written agreement to purchase or build the house before October 1 of the following year.
The home will be your primary residence for at least one year after acquiring or building the home.
You Can Combine FHSA with HBP
Concerned about having to choose between this exciting new program and other first-time buyer incentives., namely the Canada’s Home Buyers Plan (HBP) ? For those unfamiliar with the latter, please note that the HBP lets you withdraw up to a penalty-free $35,000 from your RRSP with a repayment period of 15 years. Fret not, because you don’t have to choose between one or the other. They can be combined.
What Down payment Plans Change?
A lot can happen over the course of the next two, five, ten, or fifteen years from now. You may be concerned about committing to the FHSA for this reason alone. There’s no need for trepidation, If you decide not to put your saved funds into a down-payment, you can transfer your full FHSA balance along with capital gains to an RRSP without any penalties or impact on your RRSP contribution allowance. You will eventually have to pay any required taxes on subsequent withdrawals, but this is no different than it is with any RRSP withdrawal..
Who Qualifies for FHSA
As per the name of the program, only first time buyers (you) can apply. This includes Canadian residents who have not lived in a home owned by themselves nor their spouse or common-law partner in the previous 5-years.
How Carloni Mortgage Brokers Help
Carloni Mortgage Brokers will confirm that you qualify for the program and will walk you through the entire process. Moreover, we help households with the one point of contention critics have, who state that the program doesn’t go far enough to tackle the lack of affordability. Yes, It’s true that the First Home Savings Account (FHSA) program doesn’t really address that problem. Only a well-established mortgage broker can help a new buyer with the burden of a lean real estate inventory and high mortgage rates. Carloni Mortgage Brokers has relationships with lenders which includes bulk-discount access to lower than advertised fixed and variable mortgage rates. In addition, we can connect you to alternative private lenders should the banks not offer favorable terms. View more on how we can increase your buyer power despite the Okanagan Valley’s low real estate inventory.
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