Since the FHSA arrived, a lot of what’s written about the Home Buyers’ Plan is out of date. Both tools get money out for a first home. Over time, though, they don’t cost the same.
The difference that matters
The HBP is a loan to yourself: you withdraw from your RRSP with no tax up front, then put the money back over fifteen years. Skip an annual repayment and that portion becomes taxable. The FHSA gives you a deduction when you contribute and a tax-free withdrawal for the purchase. Nothing to repay.
Why people combine them
Annual contribution limits cap how much an FHSA can hold in a short time. Someone who already has large RRSPs and buys soon will use both: the FHSA for new money, the HBP for what’s already sitting in the RRSP.
The 90-day rule
In both cases the funds generally have to sit in the account for a while before you withdraw, often 90 days. Contributing the day before an offer and withdrawing right away doesn’t work. If a purchase is coming, open the account well before you need it.
What to confirm when you buy
Annual and lifetime limits change, and so do the eligibility conditions. Confirm the figures in force the year you buy. Don’t rely on a blog article, this one included.
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