Canada's biggest lender is among the first to offer the new investment product
RBC is now offering the new First Home Savings Account (FHSA), a tax-free option for those building up wealth to buy their first home.
Details of the FHSA were announced back in August 2022 and it was anticipated that lenders would begin offering the new accounts by this spring.
"We wanted to make this account available as quickly as possible, so Canadians can start making their FHSA contributions and investing those funds, to begin their home buying journey," explained Erica Nielsen, executive vice president, Personal Banking & Investments, RBC.
The accounts combine some elements of an RRSP or TFSA and have an annual contribution limit per individual of $8,000 up to a lifetime maximum contribution of $40,000.
With certain requirements, savers can roll-over unused contribution room to future years, but contribution room only starts to accumulate after an FHSA has been opened.
Withdrawals for a qualifying home purchase are tax free and those who have been contributing to the Home Buyer’s Plan (HBP) via their RRSP can combine savings with the FHSA without impact to the contribution limits of either.
Find out if can you withdraw RRSP anytime with this article.
That means that those taking full advantage of both the FHSA and the HBP could accumulate up to $75,000 ($150,000 per couple) as well as potential earnings within their FHSA toward a down payment on a first home, as defined for an FHSA.
"The big plus is that any investment gains within your FHSA can also go toward your home purchase, on top of your $40,000 FHSA lifetime contribution maximum,” added Nielsen.
Erik Wachman, financial planning advisor at WWH Financial Group with Assante Financial Management, told Wealth Professional recently that the FHSA was no ‘silver bullet’ but is a step in the right direction.
Available online
The new savings accounts are available through RBC Direct Investing and RBC InvestEase, via the bank’s online banking service or by speaking to a financial advisor at a branch.
Nielsen is expecting strong demand for the new account.
"Our research indicates Canadians have been eagerly awaiting the FHSA, with almost one-third of those who aren't yet homeowners telling us they were planning to use this new account to save for a home purchase," he said "This new savings and investing account will be a tremendous support to anyone who has that dream."
