'First Home Savings Plan' - Update | Page 2 | General financial discussion | Discussion forum

RetirEd said
Alexandre: I strongly disagree. The amounts ARE significant, particularly in that they enable a larger down payment, which leverages a much larger house purchase.
And, as others have noted, they favour the wealthier and bid up property values.  

To meaningfully inflate real estate values FHSA holders must:

1. All of them use FHSA for its intended purpose, and not for an extra RRSP contribution with future rollover to RRSP/RRIF;
2. Put aside tax rebates they get from contributing to FHSA and use these rebates against house purchase;
3. Wait for about five years, until they have meaningful amount of $$$ in FHSA and in tax rebates.

So, if these all true, in about 5 years from now real estate values might go up by about $30,000 per $1M+ house.
It is in the worst case, because existent home owners moving to a new house are excluded from that deal, so pool of house buyers with extra $30,000 from FHSA will be way less than 100%.

I think the true and unintended result from FHSA will be people increasing their RRSP contributions. Getting back $$ in tax refunds and spending them on themselves. So, it may be big screen TVs go up in price a bit, or cruises. Whatever one could get now for extra $2,500/year.
I don't expect real estate prices jump because of FHSA and, frankly, I don't expect house ownership will go up because of it.

In regard to "favor the wealthiest," that's somewhat populist statement. The more fairer statement would be "tax rebates favor those who pay more taxes" - but that would sound like Captain Obvious statement.

One more thing to consider.

RRSP contribution limit is calculated based on employment income.

It appears FHSA does not have that restriction. Which means, even if your income comes from sources other than employment, you can contribute to FHSA as a way to defer taxes on part of income (just like with RRSP).

NorthernRaven said
FHSA accounts are apparently coming to Hubert (and Access CU as a whole?) on December 15.

Thanks for the heads up... I want to set it up at NBDB because that is where some of my RRSP is at, and the FHSA will require a fee to transfer (like RRSP), but if they are not ready by mid-Dec, I will probably set it up and fund it at Hubert to make sure that the contribution can be claimed on next spring's tax return.

Steinbach Credit Union has a 4yr./5.50% FHSA GIC, any thoughts? I'm not too familiar with this financial institution but the rate is tempting.

Got an email the other day saying that NBDB FHSAs are now available.

Curious is this account is broadly recommended even without house purchase plans in near or long-term, but rather as an account to be treated like an extra TFSA if you will?
Cheers!

everhopeful said
As long as you meet the eligibility requirements of the FHSA, you can treat it as extra RRSP room, because you are able to directly transfer FHSA funds to RRSP without affecting your RRSP contribution limits.

(I would have never designed the program like this, because I think this feature will entice many property owners to abuse it)  

Home owners are not eligible. I think you meant to say non-homeowners will use this program to expand their RRSP contribution room. That would be correct.

With annual contribution limit of $8,000 and marginal tax in excess of 30% (federal + provincial) a person who is eligible for FHSA would expect to receive an extra $2,400 or more from the CRA this year. This is nice chunk of extra money.