Guest Author Craig Austin,
Mortgage Agent Level 2 | FSRA #M19001164
We Are Mortgages | BRX Mortgage Inc. 13463
Connect with Craig:
Buying a first home is a huge milestone,
but for many Canadians, saving for the down payment can feel like an uphill battle. Rising home prices and borrowing costs have made this a significant challenge—but with the right strategy, there’s a way to help your clients stretch their savings further.
The Secret Weapons: RRSP and FHSA
These government programs are tailor-made for first-time buyers:
1. RRSP First-Time Home Buyers’ Plan (HBP)
– Withdraw up to $60,000 tax-free per person.
– Contributions reduce taxable income, resulting in significant tax refunds.
2. First Home Savings Account (FHSA)
– Save up to $8,000 annually, with a lifetime limit of $40,000 per person.
– Contributions are tax-deductible, and withdrawals are entirely tax-free when buying a first home.
By combining these programs, clients don’t just save—they grow their savings into something much bigger.
The Game Plan: Turning $150K Into $200K in Two Years
Here’s how it works:
Year 1: Build the Foundation
– RRSP Contributions: Each partner contributes $30,000 → Earns $9,900 in tax refunds per person (based on a 33% tax rate).
– FHSA Contributions: Each partner contributes $8,000 → Earns $2,640 in tax refunds per person.
– Year 1 Refunds: $12,540 per person, $25,080 combined.
Year 2: Double Down
– Repeat Contributions: Another $30,000 to RRSP and $8,000 to FHSA per person.
– Year 2 Refunds: Another $12,540 per person, $25,080 combined.
The Results After Two Years
– RRSP Withdrawals (HBP): $120,000 total.
– FHSA Balances: $32,000 total.
– Tax Refunds: $50,160 total.
Total Down Payment:
$120,000 (RRSP) + $32,000 (FHSA) + $50,160 (refunds) = $202,160
Why This Strategy Works?
This isn’t just about saving; it’s about maximizing buying power through tax-smart planning:
– Immediate Tax Relief: RRSPs provide hefty refunds while enabling tax-free withdrawals through the HBP.
– Tax-Free Growth: FHSAs combine deductible contributions with tax-free withdrawals, doubling the impact.
– Smarter Contributions: Spreading contributions over two years maximizes refunds without overstretching finances.
The Payoff
– Bigger Budget: A larger down payment reduces mortgage size and interest costs.
– Tax Savings: Extra refunds can go directly toward the home purchase.
– Proven Path: This strategy is practical and achievable for first-time buyers.
