Here’s what you need to know about using this account, including FHSA contribution limits and deadlines, how to open an FHSA account online and why it might make sense to open one if you’re undecided about home ownership and struggling with your decision.
What is a first home savings account (FHSA)?
The FHSA is a tax-free registered savings account that launched in April 2023. Designed to help first-time buyers save a little money and get into the housing market sooner, the FHSA allows account holders to contribute up to $8,000 a year. , up to a lifetime FHSA limit of $40,000 (or double that amount if you’re part of a married couple and first-time homebuyers). Depending on where you open your FHSA, you can grow your money quickly. For example, EQ Bank’s FHSA Savings Account offers 2.75% interest and a limited-time bonus offer (more on that below).
Some registered accounts offer tax-free deposits or withdrawals—not both—but the FHSA is completely tax-free as long as the funds are used to buy your first home. This allows for tax protection on both contributions and withdrawals, including any income received through interest, dividends or capital gains. An FHSA can hold a variety of eligible investments, including guaranteed investment certificates (GICs), exchange-traded funds (ETFs) and more.
What is the FHSA contribution limit?
One important detail to know about FHSA is that contribution room is only created once you open an account. That’s different from a tax-free savings account (TFSA), whose contribution room is based on the account holder’s age. Knowing this, it makes sense to open an FHSA sooner rather than later, even if you can’t contribute much (or anything) right away.
For example, if you open an FHSA on December 31, 2024, you will receive $8,000 in contribution room in 2024 on the day you open the account, and an additional $8,000 in room in 2025 on January 1, for a total of $16,000 in contribution room. .
Also, some FHSAs offer interest on your savings. EQ Bank’s FHSA Savings account pays 2.75% interest, and, for a limited time, you can earn a 1% bonus on new deposits and transfers made between Nov. 1, 2024, and Feb. 28, 2025. You can open an EQ Bank FHSA online in minutes. (The EQ Bank FHSA is not available in Quebec.) Also, there is no minimum deposit when you open an FHSA with EQ Bank. You also have the option to buy EQ Bank’s FHSA GICs (minimum term of three months).
sponsored
EQ Bank FHSA Savings Account
- Interest rate: 2.75%, and a 1% rate for a limited time on new deposits and money transfers between Nov. 1, 2024, and Feb. 28, 2025. Read full details on the EQ Bank website.
- Minimum balance: n/a
- Eligible for CDIC coverage: Yes
Why opening an FHSA makes sense even if you’re unsure about home ownership
The FHSA pairs well with several other home buying tools for beginners. You also have access to the Home Buyers Program (HBP), which allows individual investors to borrow up to $60,000 from their registered retirement savings plan (RRSP), without penalty or tax payments, to pay for a home. (Until recently, the amount you could borrow was $35,000 per person—the limit was raised in 2024.)
It doesn’t end there. Upcoming regulatory changes aim to make credit more accessible. On Dec. 15, 2024, the price of homes that qualify for an insured mortgage will increase from $1 million to $1.5 million. In addition, first-time home buyers will be able to receive 30-year amortization on any type of home (not just new construction). This will result in lower monthly management costs, which directly improves the availability of certain assets.
Source link
