Learn how CIBC FHSA can support your clients' first-time homebuying goals. Keep reading to enhance your financial advisory services using this registered plan
Buying a house for the first time can be tough for many. Despite the softening housing crisis in Canada, home affordability has been unattainable for many aspiring buyers nationwide in recent years. If they go shopping for new homes, they will have to face rising property prices and a bleak supply.
To help first-time homebuyers, the Canadian federal government has created the First Home Savings Account (FHSA) program. It is a saving account which is exclusive for qualified property buyers who have not owned nor bought a house. Those who are eligible can open an account in numerous banks including CIBC.
In this article, Canadian Mortgage Professional will talk about the CIBC FHSA. We will give you a bit of background about CIBC, then focus on their FHSA offering. We will discuss the following key points:
- how the CIBC FHSA works
- who are eligible
- how to put money into CIBC FHSA
Interested to know if you have clients who can create an FHSA with the CIBC? Keep reading for more.
Introduction to CIBC
The Canadian Imperial Bank of Commerce (CIBC) is a multinational banking and financial services corporation created in 1961. It resulted from a union between the Canadian Bank of Commerce and the Imperial Bank of Canada. It was the biggest merger between two chartered banks in the country.
Currently, CIBC has its headquarters in Toronto’s financial district in the province of Ontario. It is listed as one of Canada’s Big Five banks.
As for its products and services, CIBC offers banking accounts for savings and business purposes. They also have mortgage, insurance, and investment products.
What is the FHSA?
The Canadian Federal government created the FHSA in 2022 as a tax-free program. This is mainly for first-time property buyers who are 18 to 40 years old. They can deposit $8,000 every year on their FHSA along with a $40,000 lifetime contribution. This helps them save money to buy their dream home in the future.
CIBC FHSA: How it works
The CIBC FHSA is a special account created to help Canadians save for their first home. Buying a home is a big step, and many first-time buyers face challenges like high prices and limited options. The CIBC FHSA is designed to make this process easier.
With the CIBC FHSA, your clients can save money without having to pay taxes on the profits. This means that any interest or investment growth in their account is tax-free, allowing their savings to grow faster.
This account is also flexible. Account holders have the option to withdraw their savings when they are ready to buy their first home.
Check out this clip to better understand how FHSA works:
If you want to expand your knowledge about the FHSA, its rules, and more, feel free to read this guide.
Who is eligible for the CIBC FHSA?
CIBC has set two requirements for those who want to open an FHSA with them. To become eligible, your client must be:
- a Canadian resident who has reached the age of majority in their province or territory
- a first-time homebuyer who hasn’t resided in a qualifying property in the current or past four calendar years
If your client is new to Canada, they can still be accepted by CIBC to open an FHSA and save for their first home. First, they need to be considered as “first-time homebuyers” before signing up for this service.
Your client should provide evidence that they haven’t resided in a qualifying property that they own or jointly own. The limiting period for this is during the current or past four calendar years.
CIBC also requires applicants for FHSA to be a resident of the country for tax purposes. To prove this, your client must present a Social Insurance Number (SIN) or a temporary SIN.
How to put money into CIBC FHSA
Once your client has opened a CIBC FHSA, they need to follow an $8,000 annual contribution limit. This involves all kinds of transfers that they will draw from their Registered Retirement Savings Plan (RRSP).
If your client doesn’t use all their annual contribution limit, they can carry forward the unused amount to future years. The maximum amount for the unused portion is $8,000. The full $8,000 or a lower amount can be added to their contribution limit in the following years.
$40,000 lifetime contribution limit
Within 15 years of opening their CIBC FHSA, your client needs to use their contributions to buy their first property. This is also a requirement once they turn 71 years old.
Once this is done, they can make a taxable withdrawal or choose to transfer their funds into an RRSP or a Registered Retirement Income Fund (RRIF).
Want to know about the impact of withdrawing from an RRIF as a retiree? Check out this article and learn about an alternative solution called CHIP Reverse Mortgage.
Qualifying withdrawals have no limit
Your clients can enjoy unlimited, tax-free withdrawals from their FHSA if they qualify to use their funds to buy a qualifying property. They can also choose to make withdrawals from their RRSP Home Buyers' Plan (if they have one) for the same home purchase.
How can clients withdraw CIBC FHSA savings tax-free?
To withdraw their funds from their CIBC FHSA, your clients should be:
- a Canadian resident and a first-time homebuyer at the time of the withdrawal
- able to prove that they have an agreement to buy or build a qualifying home
- with intention to reside in the property and make it their principal residence within one year of purchase
CIBC FHSA: How to open an account
To open an FHSA with CIBC, your clients must submit the necessary information required by this bank. This can include their:
- date of birth
- Social Insurance Number (SIN)
- any supporting documents to confirm that they are a qualifying individual
They can also open an FHSA via two options:
1. Invest with an advisor
CIBC has advisors that can help your clients open an FHSA. These advisors will assist them in selecting the investments that they will need to grow their savings.
2. Self-directed investing
Your clients can also open an FHSA via online. They will be able to expand their portfolio with various types of investments such as stocks and mutual funds.
Why should your clients open an FHSA with the CIBC?
Are your clients interested in getting tax benefits while saving money? They might want to consider opening an FHSA with the CIBC. There are also other rewards such as reducing their taxable income through their FHSA contributions.
They can also invest in mutual funds, stocks, and other investment types without having to worry about investment income tax. As long as their earnings from these investments are within their FHSA plan, they are non-taxable.
Overall, the CIBC FHSA is a way for aspiring homeowners to buy their first home. If your clients can use this to their advantage, be sure to recommend it. Remember, their achievement of finally owning their first property is also yours only if you help them realise this dream.
Do you have clients who have already applied for CIBC FHSA? How did you help them? Feel free to share some tips in the comments section below.
