Earlier this year, the HBP got a significant makeover. Here’s what’s new about the HBP, plus how you can use it together with other savings tools: a first home savings account (FHSA), a tax-free savings account (TFSA) and—recently introduced in Canada—EQ Bank’s Notice Savings Account. Read on for more details.
How has the Home Buyers’ Plan changed?
Home buyers should know about two major changes to the HBP. First, you can take out more money from your RRSP to buy or build a home—the maximum withdrawal amount has increased from $35,000 to $60,000, as of mid-April 2024. Couples can withdraw up to $120,000.
Second, you have more time to pay back your RRSP. As a temporary relief measure, home buyers who make an HBP withdrawal between Jan. 1, 2022, and Dec. 31, 2025, have five years to start repayment. Previously, the grace period was two years. The repayment period itself hasn’t changed—it’s still 15 years.
These changes were announced as part of the 2024 federal budget in April, among other measures aimed at improving home affordability in Canada.
Combining the HBP and the FHSA to buy a home
April 1, 2024, marked the one-year anniversary of the first home savings account (FHSA), a registered account that gives aspiring home owners $40,000 of additional tax-free savings room to save for a down payment. The FHSA has proven to be highly popular—as of April, more than 750,000 Canadians have opened one, according to the federal government.
“Home ownership is an integral part of most Canadians’ financial goals, and saving and planning are the cornerstones of achieving this dream,” says Mahima Poddar, group head of personal banking at EQ Bank. “The FHSA is an important tool in this journey, and it’s never too late to open one.”
The FHSA contribution limit is $8,000 per year, and you can carry forward up to $8,000 of unused room for one year. By 2028, Canadians who opened an FHSA in 2023 will have the full $40,000 of contribution room.
FHSA contributions are tax-deductible, and FHSA withdrawals are tax-free. Any money you earn inside the account is tax-free, as long as it goes towards buying a home. All of these benefits help buyers reach their savings goal faster.