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Date published
Post Categories First Time Home Buyers, Mortgage Tips, News

What is a First Home Savings Account and How Does it Work for Your Mortgage

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A new survey by BMO Investment has found that over half of first-time home buyers in Canada will use a first home savings account (FHSA), but many of them aren’t even aware of the features and benefits of the account. Have you heard of a First Home Savings Account?

In this article, I will share about this new type of account and why so many people are using it to purchase their first homes.

What is a FHSA account?

A First Home Savings Account (FHSA) combines some of the benefits of a Registered Savings Plan (RRSP) as well as a Tax-Free Savings Account (TFSA). 

The First Home Savings Account allows people to hold several asset types within the account. This can include cash, GICs, ETFs, mutual funds, stocks or bonds. 

When you contribute to this type of account, the contributions are tax-deductible, earnings are tax-sheltered and withdrawals going towards a qualified first-time home purchase are tax-free. 

First time home buyers can contribute up to $8,000 within a year or a lifetime contribution of $40,000.

Why is the FHSA account a good idea?

Now that you understand what a FHSA account is, let’s chat about why Canadians are using them to purchase their first homes.

As we all know, housing affordability is a problem that many people who are trying to get into the market are facing. It’s a large barrier that keeps people unable to break into the housing market. BMO has found that this type of account is a great way for Canadians to work towards savings for a down payment to buy the home. 

A man and woman enjoying their new home that they purchased with a first home savings account.

This account provides people with the ability to save and understand where their money is and what it’s going towards. 

Having your funds within one account for the mortgage process is a huge benefit as well. It makes it a clean transaction and that’s something lenders really want to see. 

The savings plan.

The First Time Home Savings Account also has a program that helps people create a saving plan. When you have a plan, it’s always easier to save. Whether it’s discussing how much money you’re putting within this account every month or how much money you need by a certain amount of time, creating a plan of action will get you to your goal quicker. 

When you have the money saved, what’s next?

When you have the amount of money you need for a home purchase, it’s time for the fun part! When you’re ready to begin the home buying process, reach out to a mortgage broker, like myself, to get pre-approved for a mortgage.

I’ll be able to show you what you are approved for with a lender at what rate. Then, you can begin searching for the dream home. Once you’ve found one, we’ll be able to use your funds within the First Home Savings Account for your down payment. 

Please reach out to me if you have any further questions about FHSA’s and how they work within the mortgage process. Give me a call at 250-826-3111 or reach out to me through my website. I look forward to chatting with you soon.

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