BJK Financial Group Blog

I have been writing about the challenges facing first-time Canadian home buyers for a couple of years now. Most of my thoughts have centered around the tax-free First Home Savings Account (FHSA). It is not the same thing as the First-Time Homebuyer Incentive (FTHBI) that the Canada Mortgage and Housing Corporation (CMHC) closed last week. And from everything I have read about the program it was not all that popular and not a lot of families used it to help with the purchase of their first home. So…

When CMHC launched the FTHBI they had a stated goal of 100,000 approved buyers by March of 2025. But according to a graph reproduced in a CBC story describing the program’s cancellation it had only around 18,500 participants by 2022 and the growth the program was demonstrating offered no sense that it would ever come close to achieving its goal. In fact, the story went on to describe how the Toronto mortgage broker who agreed that "We had a lot of young Canadians asking about this program" but only two of her clients ever qualified.

Why did the FTHBI fail?

Common complaints about the program were that it had upper limits on household incomes for qualified participants. For instance:

• The household income ceiling was $120,000
• You had to already have the minimum down payment saved up
• Your maximum mortgage could not exceed four times your income (ie. Not greater than $480,000)
•  The federal contribution was considered equity in the home, payable upon its sale (commensurate with the price of the house when it’s sold)

Even when I listed average real estate prices in Kitchener last August, even a condominium cost more than $480,000. Less as your income dipped below the income threshold.

In addition, income and mortgage maximums were somewhat higher in the costliest cities of Toronto, Vancouver and Victoria.

The fact that CMHC would have equity in the home was especially troublesome for many people who looked into it and ended up seeking other options.

In the end, the program did not serve the needs of first time home buyers and it basically got cancelled due to lack of interest.

 So, let’s go back to the FHSA

The FHSA was a new program introduced last April. I guess that means the program will soon reach its first anniversary. And as I described it last fall, the program works like an RRSP. It is tax-deductible and has a lifetime limit of $40,000 and yearly limits of $8,000.

And then there is also the Home Buyer’s Plan that allows for transfers from your RRSP. And just to be clear, you can do that with your FHSA too.

The important thing is that with all of these conditions and qualifications (some set by the financial institution you have the funds with) you really do need to consult with your advisor for the proper advice for your situation. Because every situation is different.

Buying a house is a big financial decision. Make sure you understand all your options

The demise of the FTHBI demonstrates how difficult it can be to offer the right help in Canada’s ever changing real estate market. And maybe the FHSA will be able to help Canadian’s more effectively. 

Whatever else, it is still a challenging experience. Figuring out the financial details - on top of finding a home that you can afford and enjoy - can be stressful. Finding the right professionals to help you through the process - like real estate agents and financial advisors - will help you make the best of a situation that can be both exciting and stressful. If you want to talk through your options, please feel free to text or call me at (519) 279-0186 or email me at [email protected]. You don’t need to go through this alone.