FHSA or RRSP HBP? The Vote was Close

Knowledge Bureau Report asked pros across the country whether the First Home Savings Account (FHSA) or the Registered Retirement Savings Plan (RRSP) is the better savings vehicle for home buyers.  The vote was close. 

The question posed: “In your view is the FHSA (maximum $40,000) a better home savings plan than the RRSP Home Buyer’s Plan (maximum $35,000)?”

The vote broke down as follows: 59.8% said yes and 40.2% said now.

Here are some of the reasons why, according to our engaged readers:

The answer, as always, is “it depends”. There are a variety of factors to consider including where the client is at with respect to life stages. In most cases, either one requires some planning ahead, unless the individual has an influx of money they could put into an RRSP for 90 days to take advantage of the HBP.

Some people will utilize the HBP as a way to shift taxes around. If you don’t repay the HBP, you pay the taxes over 15 years and reduce the possibility of bigger tax bills in retirement or to the estate.  In that sense, the HBP is perhaps a bit less restrictive than the FHSA.

As the FHSA is new, nobody has any money in there yet, so it won’t be an effective tool for some time. If one doesn’t purchase a home, then additional hoops are created to jump through.

Either way, the primary piece is that if folks want to purchase a home, they should be saving. The argument can be made that they should be saving regardless of whether they want to purchase a home or not. 

By Derek T on September 19, 2022

From what I have read, the FHSA seems better. It has the benefits of an RRSP in that contributions are tax deductible and income grows tax free inside the plan (when proceeds are used to buy a home). It has the added advantage of removing the total accumulated proceeds tax-free – again when buying a home. It allows taxpayers to segregate funds dedicated to a home purchase, keeping any retirement funds (ie RRSP) separate, as well. It’s too new, I suppose to be sure. Time will tell….
The only caveat is to make sure funds are withdrawn to buy a home. Otherwise, if there is a large accumulation of funds at withdrawal, a significant tax bill might be incurred. So, contributors need to be sure of their home buying intentions and their ability to afford to buy a home. This may be too intimidating for some taxpayers. And, I am old enough to remember the RHOSP and have wondered for many years recently why it was not re-introduced. From what I remember, this is close.

By Michael on September 09, 2022

The FHSA is a “no-brainer” for so many reasons.

By Terry on September 08, 2022

I prefer the FHSA. The FHSA reminds me of the simple RHOSP plan that was available 1974-1985 – introduced by a previous Trudeau government. I feel it is better for budgeting and planning to keep savings dedicated to home ownership separate from savings targeted for retirement…just like it had been with the RHOSP. The new FHSA forces the saver to think ahead, like the RHOSP, the way savings should be arranged—before the home purchase. The RRSP-HBP is effectively an additional debt to be repaid over 15 years on top of making mortgage payments—after the home purchase. Because HBP payments are optional, the HBP erodes the discipline of treating RRSP savings like a pension that needs to remain untouched until senior years.

By Terry McBride on September 08, 2022

Prefer the RRSP.

By Randolph Edmead on September 07, 2022

Unlike the HBP, it’s non-repayable over 15 years.

By Timi Adetona on September 07, 2022

Not everyone today can contribute equally to a FHSA & RRSP to reach the maximum First Home savings incentive. I am concerned that the taxpayer will look only at the $5000 difference in FHSA vs RRSP and select FHSA. Thus, possibly missing out on yearly federal tax deductions by opting out of yearly RRSP contributions (affording one or the other). My suggestion is to seek advice from a tax advisor, who will work numbers, and hit the calculator to see what RRSP contribution potential is available to reach the fullest refund. It is a conversation to have with clients: to educate them re: what are options available, what fits into their budget, and how they can accomplish both.

By Ann Laurin on September 21, 2022

Comments have been condensed and edited.

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