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Tax-Free First Home Savings Account?

what is the Tax-Free First Home Savings Account?

In Budget 2022, the Government of Canada introduced the concept of a Tax-Free First Home Savings Accounts (FHSA), a registered plan, to assist eligible first-time home buyers save $40,000 on a tax-free basis. Similar to a registered retirement savings plan (RRSP), contributions are tax-deductible, and like a tax-free savings account (TFSA), withdrawals to purchase a first home would be non-taxable. 

Note that there would be an $8,000 annual contribution limit & a $40,000 lifetime contribution limit and the Government of Canada anticipates the roll-out of the Tax-Free First Home Savings Account sometime in 2023. 

How to open a tax-free First Home Savings Account?

Like all government-backed programs, there is eligibility criteria and ‘small print’ that should be reviewed in order for one to understand if they qualify and if the program suits their needs and circumstances. For one to open an account, they must be a Canadian resident at least 18 years of age and considered a first-time home buyer, meaning that they have not owned a home that they’ve lived in during the calendar year before they open account or anytime during the preceding four calendar years. Note that a FHSA of an individual would cease to be an FHSA and would not be able to open an FHSA after December 31 the year in which the earlier of the fifteenth anniversary of the opening of their first FHSA, and the individual turning 71 years old. 

NOTE: One can transfer, tax-free, savings that weren’t used to purchase a home, to an RRSP or RRIF, until December 31 of the year following the year of their first qualifying withdrawal – otherwise, funds would need to withdrawn on a taxable basis. 

Considering a Condo Hotel?

If you are interested in purchasing a unit in a condo-hotel either to live in and occupy as your principal residence, be aware that there is a smaller lender audience willing to finance these assets. Alternatively, if you plan to purchase a condo-hotel unit as an investment property, be sure to inquire as to the policies surrounding rentals, specifically short-term rentals, to ensure that you are abiding by condo/strata corporation by-laws. One can do this by speaking with their condo/strata corporation and or a real estate lawyer. This might seem like a minute detail, however, due diligence is always recommended, especially in these situations. In either case, these unique property types can be an incredible opportunity for a principal residence or an income producing property. 

What are examples of Condo-Hotels?

The city of Toronto, for example, is home to many condo-hotels including but not limited to:

There are individuals who enjoy dining, amenities & the general ‘vibe’ of residing at, or owning for investment purposes, a condo-hotel. DV Capital maintains mortgage lender partnerships that allows them to service their clients who wish to purchase or refinance a strata-condo. Contact us anytime to discuss mortgage financing for condo hotels.

Trigger rates in the Media.

Our Principal Broker, Daniel Vyner, was recently contacted by Business in Vancouver, to opine on the impacts of trigger rates, and noted that depending on the financial stability of fixed payment variable rate mortgage holders, some may be experiencing financial distress and fear of managing the increased mortgage payments.

Feel free to review a bulletin that was released by the Bank of Canada which can provide additional insights into the reality and ramifications of trigger rates on fixed payment variable rate mortgages. 

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