Looking to buy your first home? Saving up for your down payment can seem virtually impossible unless you have a plan in place. Fortunately, there are more savings options available today than ever before.
There are three main savings accounts you can use to your advantage when it comes to choosing a strategy to help finance your first home. You can use a tax-free savings account (TFSA), a registered retirement savings plan (RRSP) and the newest savings tool – the first home savings account (FHSA).
The FHSA combines the benefits of both an RRSP and a TFSA. Contributions to an FHSA are tax-deductible, like with an RRSP, and withdrawals are non-taxable, similar to a TFSA. And because the FHSA is completely tax-free, the account allows for tax-free growth while being held in the account (similar to both RRSPs and TFSAs).
The FHSA program allows contributions of $8,000 a year for five years for a lifetime maximum contribution amount of $40,000. It’s, therefore, best suited for people planning ahead to buy a home a few years down the road.
Take advantage of multiple savings tools
It’s beneficial to put your first $8,000 of savings every year towards an FHSA and then contribute any additional savings you may have into an RRSP and/or TFSA. Be sure to talk to your accountant or financial planner to see which savings program or combination of accounts will work best for you.
Your mortgage agent can help you prepare for homeownership – everything from building credit and saving for a down payment to budgeting for closing costs and getting you preapproved for a mortgage before you head out home shopping so you know what you can comfortably afford to spend.
Have questions about your down payment savings choices or mortgage options in general? Answers are a call or email away!