Two of Canada’s major banks are now offering the new tax-free First Home Savings Account (FHSA), weeks after the government launched the banking option for prospective homeowners.
National Bank of Canada and Royal Bank of Canada both announced last week that they are offering the option for customers.
WHAT IS A FHSA
Announced in the 2022 federal budget, the tax-free savings account “combines the best features of an RRSP (Registered Retirement Savings Plan) and a TFSA (Tax-Free Savings Account),” according to RBC.
Contributions are tax deductible and earnings within the account are tax-free, under the condition that they are used for a home purchase once withdrawn.
The account has a lifetime limit of $40,000 and an annual contribution limit of $8,000, with unused portions able to carry forward into the next year. Accounts can be open for 15 years, until the person turns 71 or makes their first qualifying withdrawal – whichever comes first.
It is open to Canadian residents who are first-time homebuyers between the ages of 18 and 71, except in provinces where the legal age to enter a contract is 19.
Erica Nielsen, RBC’s executive vice-president of Personal Banking & Investments, said the bank’s research shows strong interest in the account among hopeful homeowners.
"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," Nielsen said in a news release.
"This new savings and investing account will be a tremendous support to anyone who has that dream.
WHERE IS IT AVAILABLE
None of the big six Canadian banks offered the FHSA on the April 1 government launch date. So far, RBC and National Bank are the only two major banks that have made the option available to customers.
RBC said people can open accounts digitally through RBC Direct Investing and RBC InvestEase, by speaking with a financial advisor or by visiting an RBC branch.
National Bank directed people to schedule an appointment online about setting up an account.
As another option, online investing firm Questrade is now offering the FHSA. Fidelity Investments Canada, another financial services business, also announced it would offer the account as of April 19, “subject to operational readiness by intermediary financial institutions and partners that offer Fidelity funds.”
TD Bank said in an email that it is aiming to launch the account option in "summer 2023." In the meantime, it is inviting customers to sign up for updates on its website.
On its website, BMO said the FHSA accounts will be available to customers “around mid-2023.” CIBC said in an emailed statement that it plans to offer the FHSA “later this year,” and would share more about the exact timeline “in the coming months.”
Scotiabank said in an email that it is “targeting to offer the new first-time homebuyer’s savings account to customers in the 2023 tax year.”