The HBP underwent a significant overhaul earlier this 12 months. Here’s what’s latest in regards to the HBP and the way you should use it with other savings vehicles: a First Home Savings Account (FHSA), a Tax-Free Savings Account (TFSA) and – recently introduced in Canada –EQ Bank cancellation savings account. Read on to seek out out more details.
How has the Home Buyers’ Plan modified?
Homebuyers should find out about two major changes to the HBP. First, you’ll be able to take more cash out of your RRSP to purchase or construct a house—the utmost withdrawal amount has been increased from $35,000 to $60,000 starting in mid-April 2024. Couples can withdraw as much as $120,000.
Second, you could have more time to pay back your RRSP. As a brief relief measure, homebuyers who make an HBP withdrawal between January 1, 2022, and December 31, 2025, can have five years to start repaying. Previously, the grace period was two years. The repayment period itself has not modified—it continues to be 15 years.
These changes were announced in April as a part of the 2024 federal budget, amongst other measures to enhance home affordability in Canada.
Combining HBP and FHSA to purchase a house
April 1, 2024, marks the anniversary of the launch of the primary Home Ownership Savings Account (FHSA), a registered account that provides prospective homeowners a further $40,000 in tax-free savings for a down payment. The FHSA has proven to be extremely popular—greater than 750,000 Canadians had opened an account as of April, based on Canadian federal government data.
“Owning a home is an essential part of most Canadians’ financial goals, and saving and planning are the cornerstones of achieving that dream,” says Mahima Poddar, Group Head of Retail Banking at EQ Bank. “The FHSA is an important tool in that journey, and it’s never too late to open an account.”
The FHSA contribution maximum is $8,000 per 12 months, and you’ll be able to carry over as much as $8,000 of unused room for a 12 months. By 2028, Canadians who opened an FHSA in 2023 can have the complete $40,000 contribution room.
FHSA contributions are tax deductible and FHSA withdrawals are tax-free. Any money you earn within the account is tax-free so long as it’s used to buy a house. All of those advantages help buyers reach their savings goal faster.
