The Truth About the FHSA: Debunking Common Myths About the New Savings Plan for First-Time Home Buyers

 In my previous post, I introduced you to the First Home Savings Account (FHSA), a new type of registered savings plan that can help you save for your first home faster and easier. 

Since then, I’ve received some questions and comments from you about the FHSA and how it works. I’ve also noticed some confusion and misinformation about the FHSA in the media and online. So, I decided to write this follow-up newsletter to clear up some common misconceptions about the FHSA and help you make an informed decision about whether it’s right for you.

Myth: The FHSA is only for low-income earners.

Fact: The FHSA is available to anyone who meets the eligibility criteria, regardless of their income level. However, the FHSA may be more beneficial for those who are in a higher tax bracket, as they can save more on taxes by deducting their contributions from their income. The FHSA may also be more attractive for those who live in areas where housing prices are high and saving for a down payment is challenging.

Myth: The FHSA replaces the Home Buyers’ Plan (HBP).

Fact: The FHSA does not replace the HBP, but rather complements it. You can use both plans to save for your first home, or choose the one that best suits your needs and goals. The main difference between the two plans is that the HBP allows you to withdraw up to $35,000 from your RRSP without paying tax, but you have to repay it within 15 years. The FHSA allows you to withdraw up to $40,000 from your account without paying tax or repaying it, but you have to contribute to it over time and earn investment income.

Myth: You can use your FHSA for any home purchase.

Fact: You can only use your FHSA for your first qualifying home purchase. A qualifying home is a property located in Canada that you intend to occupy as your principal place of residence within one year after buying or building it. It can be a single-family home, a semi-detached home, a townhouse, a mobile home, a condominium unit, or a share in a co-operative housing corporation.

Myth: You can withdraw from your FHSA anytime.

Fact: You can withdraw from your FHSA at any time, but only for the purpose of buying or building a qualifying home. If you withdraw from your FHSA for any other reason, you will have to pay tax on the amount withdrawn and you will lose your contribution room permanently. You will also have to close your FHSA within 30 days after withdrawing from it.