Survey: Canadian First-Time Homebuyers Still Unaware of FHSA Benefits

On December 7, BMO Canada released its 14th Annual Investment Survey, revealing that while there is excitement around the First Home Savings Account (FHSA), there is also a significant knowledge gap about how the account can help Canadians.

The survey shows that 52 percent of first-time homebuyers in the country will likely use the FHSA to save money. Meanwhile, 24 percent of parents will likely use the account to help their kids save for their first homes.

While the survey proved that many potential Canadian first-time homebuyers would like to open an FHSA, it also found that 69 percent of participants still lack knowledge about the account.

Open to the public since April 1, 2023, the FHSA is a tax-free home-savings plan that helps Canadians save for their first homes. The account combines the crucial benefits of a Tax-Free Savings Account (TFSA) and a Registered Retirement Saving Plan (RRSP).

Under this plan, investors can hold various asset types within the account, including the following:

  • Exchange-traded funds (ETFs)
  • Mutual funds
  • Guaranteed Investment Certificates (GIC)
  • Securities like bonds or stocks
  • Cash

Contributions for this plan are tax-deductible, and earnings are tax-sheltered. Canadians applying for it can also enjoy tax-free withdrawals. Every year, they can deposit up to $8,000 to the account, which has a lifetime contribution limit of $40,000. To qualify for the plan, you must meet the following criteria:

  • At least 18 years old
  • Not over 71 years old on December 31, the year you opened the account
  • A first-time homebuyer
  • A resident of Canada

“Homeownership continues to be an important milestone for many Canadians and their families, and using all available tax-advantaged accounts like the FHSA makes that a little bit easier,” said Nicole Ow, retail investments lead at BMO, who instructed those buying their first homes to work with a professional advisor.

An advisor can help them understand the different investment strategies that apply to FHSA. With professional help, homebuyers can develop a financial plan that can help them stay on track toward their goal of purchasing their own homes.

Meanwhile, Robert Kavcic, a senior economist at BMO, mentioned how the FHSA could be a wise option for people facing housing affordability problems in the country. “The FHSA is one way Canadians can work toward saving for that down payment to buy their first home,” said Kavcic.

He added that the FHSA can help people meet their financial goals despite the several economic forces working against them.

BMO Canada offers various personal banking services, including checking and savings accounts, credit cards, mortgages, loans, and investments. The company also provides the following tools and FHSA resources to help Canadians throughout their home-buying journey:

  • BMO SmartProgress is an online education platform with a homeownership playlist where clients can access learning modules about managing finances.
  • The company’s pre-approval process provides homebuyers with a cushion for due diligence when they purchase a home.
  • BMO’s pre-qualification process helps prospective homebuyers get a mortgage estimate based on various financial data such as income, assets, and debt.

Buying a home can be a complicated process affecting your savings and taxes. Canadians who are considering applying for FHSA and are concerned about its tax implications will need the help of expert tax accountants.

Faris CPA provides the services of accountants who can support individual investors, independent professionals, and small- to medium-sized businesses. With the help of the company’s tax accountants, homebuyers can get the best tax advice possible to avoid undue taxes and penalties.