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What’s new with the HBP? You can now borrow up to $60,000 from your RRSP to buy your first home. Here’s how to use the HBP and other savings tools.
Are you saving up to buy your first home? The Home Buyers’ Plan (HBP) can help you get there. This government program enables first-time buyers to borrow money from their registered retirement savings plan (RRSP) to purchase or build a property.
Earlier this year, the HBP got a significant makeover. Here’s what’s new about the HBP, plus how you can use it together with other savings tools: a first home savings account (FHSA), a tax-free savings account (TFSA) and—recently introduced in Canada—EQ Bank’s Notice Savings Account. Read on for more details.
Home buyers should know about two major changes to the HBP. First, you can take out more money from your RRSP to buy or build a home—the maximum withdrawal amount has increased from $35,000 to $60,000, as of mid-April 2024. Couples can withdraw up to $120,000.
Second, you have more time to pay back your RRSP. As a temporary relief measure, home buyers who make an HBP withdrawal between Jan. 1, 2022, and Dec. 31, 2025, have five years to start repayment. Previously, the grace period was two years. The repayment period itself hasn’t changed—it’s still 15 years.
These changes were announced as part of the 2024 federal budget in April, among other measures aimed at improving home affordability in Canada.
April 1, 2024, marked the one-year anniversary of the first home savings account (FHSA), a registered account that gives aspiring home owners $40,000 of additional tax-free savings room to save for a down payment. The FHSA has proven to be highly popular—as of April, more than 750,000 Canadians have opened one, according to the federal government.
“Home ownership is an integral part of most Canadians’ financial goals, and saving and planning are the cornerstones of achieving this dream,” says Mahima Poddar, group head of personal banking at EQ Bank. “The FHSA is an important tool in this journey, and it’s never too late to open one.”
The FHSA contribution limit is $8,000 per year, and you can carry forward up to $8,000 of unused room for one year. By 2028, Canadians who opened an FHSA in 2023 will have the full $40,000 of contribution room.
FHSA contributions are tax-deductible, and FHSA withdrawals are tax-free. Any money you earn inside the account is tax-free, as long as it goes towards buying a home. All of these benefits help buyers reach their savings goal faster.
Opening an FHSA can be quick and convenient, Poddar adds. “It’s important to find an FHSA that’s easy to open online. This helps aspiring home owners start saving as quickly and stress-free as possible.”
An FHSA can hold cash deposits and a variety of qualifying investments. To preserve their hard-earned savings, home buyers can consider low-risk investments such as guaranteed investment certificates (GICs) or pick an FHSA that pays interest. EQ Bank’s FHSA Savings Account, for example, pays 2.75% on cash deposits, and it is protected by Canada Deposit Insurance Corporation (CDIC) coverage (the EQ Bank FHSA is not available in Quebec). EQ Bank also offers FHSA GICs with terms from three months to 10 years.
If you contribute the maximum $40,000 to an FHSA and also withdraw the full $60,000 you can access using the HBP, you could have a down-payment nest egg of $100,000—double that for couples.
If you qualify as a first-time home buyer and you’re thinking about getting into the market in the next few years, consider opening an FHSA now, to start accumulating contribution room. An FHSA can stay open for 15 years or until the end of the year you turn 71. If you don’t end up buying a home with your FHSA, you can transfer the money directly into your RRSP or registered retirement income fund (RRIF) tax-free. You can also withdraw the money—it will be added to your taxable income for the year.
If you max out your FHSA contribution room each year—as many account holders do—you have other account options to grow your money while you save: a tax-free savings account (TFSA), which can hold cash and investments, and the EQ Bank Notice Savings Account, which also holds cash. Let’s look briefly at each one.
The TFSA contribution limit is based on your age. Your TFSA contribution room started accumulating the year you turned 18. (Check your limit with MoneySense’s TFSA contribution room calculator.) Each year, the government announces the next year’s contribution room. For 2024, the limit is $7,000. EQ Bank’s TFSA Savings Account pays 2.50% in tax-free interest, and your deposits are covered by CDIC insurance.
Besides a TFSA, there are other savings options that offer returns that beat holding money in traditional chequing/savings accounts.
One that’s relatively new to the Canadian market is the EQ Bank Notice Savings Account, which pays 3.50% or 3.65% interest on cash deposits. These rates are comparable to those of today’s most competitive one-year GICs. The advantage of the Notice Savings Account: it provides much greater flexibility. Account holders agree to give either 10 days’ notice to receive 3.50%, or 30 days’ notice to receive 3.65% interest. Using the Notice Savings Account takes a bit of planning, but you’ll likely find that these notice periods are no problem for a medium-term financial goal like saving for a down payment.
Interest on the EQ Bank FHSA Savings Account and EQ Bank Notice Savings Account is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
A recent EQ Bank survey found that the majority of Canadians (89%) are saving for a short-term or medium-term goal such as travel, an emergency fund or home renovations. The most popular savings vehicles? Regular chequing accounts—used by 60% of respondents—followed by TFSAs (57%) and regular savings accounts (50%).
Regular chequing and savings accounts pay little to no interest. (EQ Bank’s survey found that only 19% of respondents using chequing accounts earn interest on their deposits, and only 39% of those using regular savings accounts.) Why is that a concern? Money kept in regular bank accounts loses purchasing power over time due to inflation, plus you may be paying monthly account fees. If your accounts aren’t helping your savings to grow, consider an alternative that does.
“The key is to be mindful while choosing saving products,” says Poddar. “Ask yourself the tough questions—is this the best product for my situation? Has this financial institution served me well in the past? Is the interest being offered promotional or consistent? Are there terms and conditions I’m not aware of that may impact returns? The devil is in the details, and it’s important not to be afraid to look at the fine print and explore other options that may help your money work harder for you.”
Home prices vary widely across Canada. To give you an idea of how much you’ll need to save or borrow on top of maximizing the use of the HBP and an FHSA, here are the benchmark home prices in 10 major cities.
| City | Average home price June 2024 | 20% down payment | Max. HBP + FHSA: individual | Max. HBP + FHSA: couple | Additional funds needed for 20% down: individual | Additional funds needed for 20% down: couple |
| Vancouver | $1,207,100 | $241,420 | $100,000 | $200,000 | $141,420 | $41,420 |
| Victoria | $872,800 | $174,560 | $100,000 | $200,000 | $74,560 | n/a |
| Calgary | $589,000 | $117,800 | $100,000 | $200,000 | $17,800 | n/a |
| Edmonton | $401,100 | $80,220 | $100,000 | $200,000 | n/a | n/a |
| Regina | $318,100 | $63,620 | $100,000 | $200,000 | n/a | n/a |
| Winnipeg | $362,700 | $72,540 | $100,000 | $200,000 | n/a | n/a |
| Toronto | $1,110,600 | $222,120 | $100,000 | $200,000 | $122,120 | $22,120 |
| Ottawa | $647,700 | $129,540 | $100,000 | $200,000 | $29,540 | n/a |
| Montreal | $537,700 | $107,540 | $100,000 | $200,000 | $7,540 | n/a |
| Halifax | $548,800 | $109,760 | $100,000 | $200,000 | $9,760 | n/a |
Combining programs and tools like the HBP, FHSA, TFSA and Notice Savings Account can be powerful on the path to buying a home. As you plan your next steps, though, you’ll need to factor in all the expenses of acquiring and owning your property.
What’s on the list? Land transfer taxes, legal fees, moving costs, mortgage payments, property taxes, maintenance costs, condo fees, utilities, title insurance and home insurance. Plus, if you use the HBP, your repayment begins five years after you buy your home—each year, you’ll need to pay back at least one-fifteenth of what you borrowed from your RRSP. These costs are on top of household expenses like groceries, transportation, child care, pet care, life insurance, retirement savings and more.
That’s a long list, so plan carefully and be realistic about what you can afford. After all, the joy of home ownership won’t feel so joyful if your finances are stretched thin.
These are the findings of a survey conducted by EQ Bank from April 24 to 26, 2024, among a representative sample of 1,504 online Canadians who are members of the Angus Reid Forum. The survey was conducted in English and French. For comparison purposes only, a probability sample of this size would carry a margin of error of +/-2.5 percentage points, 19 times out of 20.
This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.
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