Affordability has been a major concern for many potential homebuyers this year thanks to rising interest rates, high inflation and housing supply issues. Fortunately, several savings accounts, incentives and rebate programs are available to help them save for a down payment and other housing costs by building a homeownership strategy.

This guide will help you help your current and future clients prepare for the biggest financial transaction(s) of their lives. 

Three savings accounts Canadians can use to help with downpayment and other homeownership costs include: 

• Registered retirement savings plan (RRSP), Home Buyers’ Plan (HBP) 
• Tax-free savings account (TFSA)
• First home savings account (FHSA)

Savings account comparison chart

Established more than 30 years ago, the HBP enables first-time homebuyers to access funds accumulated in their RRSPs to help finance the purchase of a first home tax-free. These borrowed funds must be repaid. 

The TFSA was first introduced in 2009. This registered investment account represents a flexible, all-purpose savings tool that allows account holders to contribute and withdraw from a tax-sheltered account easily and without penalty. Tax-free withdrawals can be made at any time for any purpose. There are no withdrawal limits, and there’s no payback requirement — the account holder can use savings as needed and replenish as desired (within the annual contribution amount). Contributions aren’t tax deductible.

The FHSA is brand new for 2023. It combines the benefits of both an RRSP and TFSA — it’s tax-deductible, and withdrawals are non-taxable. Since the savings are meant specifically for buying a first home, any amount withdrawn for another purpose will be taxed. The FHSA must be closed within a year from when the first withdrawal is made. And if the funds aren’t used for a first home purchase within 15 years of opening an account, it must be closed and the funds transferred to an RRSP/registered retirement income fund or withdrawn as taxable income. 

You can find a full breakdown of federal, provincial, energy efficiency and renovation programs available for your first-time homebuyer clients and existing homeowners here. 

Start early, start now

Early saving and investing for the future is key for your clients looking to become homeowners, as is making sure they have a full team of experts on their side in addition to a Realtor, including a mortgage broker/agent, financial advisor/planner and real estate lawyer. It’s also beneficial for you to refer other trusted professionals their way. Not only will this gesture help your clients save time, but it will also streamline the entire real estate process, making your job a lot easier too.

“The plans that they set up today will help down the road,” says Katy Mackenzie, a mortgage broker with TMG The Mortgage Group based in Cloverdale, British Columbia.

One of her biggest pieces of advice for first-time homebuyers, which currently make up about 40 to 50 per cent of her business, is that they shouldn’t rely on their parents to learn about the homebuying and mortgage processes. That’s because everything has changed; even if they bought within the past five to 10 years — the qualifying rate and required documentation are different. 

Mackenzie welcomes upfront conversations with potential homebuyers about financing essentials, including credit, qualification and downpayment. This information at the onset can save your clients a lot of future stress.

Since an FHSA can be opened as early as age 18, it’s a great way for Canadians to start planning for homeownership early, says Realtor Alaina Burnett with Oakwyn Realty Ltd in Vancouver. “Instead of birthday or graduation gifts, an aspiring homeowner could ask for nominal contributions to the fund from family members,” she says.

“Fortunately — or unfortunately — I’ve noticed that the Bank of Mom and Dad can make the biggest difference for homeownership for their kids. That being said, many parents are also buying presale condos that can be rented out at completion (usually 2.5 to seven years after purchase) until their kids are of age. I’m seeing this more often as of late,” Burnett adds.  

Getting clear on financial goals

This information is great for homebuyers, but it can often be overwhelming. That’s why it’s important for potential homebuyers to speak with a financial professional to ensure they’re clear on how to achieve their financial goals long before moving forward with a purchase. 

“Homeownership really needs to be a top priority if it’s going to happen,” says David Setton, a financial professional with World Financial Group based in Vancouver. Setton was a Realtor for 16 years before moving over to financial services. “Sacrifice will be necessary for most and, in some cases, drastic changes such as a career change may be in order — just not within two years of trying to qualify for a mortgage,” he says. 

Four financial strategies Setton recommends include:

1. Clearly track all expenses. This raises awareness, which enables savers to compare their actions with their goals.
2. Avoid unnecessary bank fees. Research banks that don’t charge fees.
3. Automate savings. Start small and ramp up. Every little bit helps. 
4. Automate investments. If your clients have the time horizon (at least two years) and the risk tolerance, this works well. The more they can take willpower out of the equation, the better. 

Meeting with the right professionals as soon as your clients have started saving for their first home can make a world of difference as they set themselves up for success on the road to homeownership, which has become much longer for far too many Canadians.

Cindy Freiman

Cindy Freiman is the owner of Creative Soul Communications. A journalist by trade, she’s passionate about helping businesses grow by creating top-notch educational and thought-provoking content for social media, blogging, client/referral partner communications, marketing and advertising. Cindy has specialized in mortgage financing and real estate for the past 17 years.