Learn about RBC FHSA and its benefits for your clients. Discover tax advantages, investment options, and strategies to support first-time homebuyers
In 2022, the Canadian federal government introduced the First Home Savings Account (FHSA). This specialized savings account is designed exclusively for individuals who have never owned or purchased a home.
Eligible clients can open an FHSA with various financial institutions, including the Royal Bank of Canada (RBC). The FHSA provides tax-free savings opportunities, helping prospective homeowners build their down payment faster and more efficiently.
Want to learn more on how you can use RBC FHSA to help your clients?
In this article, Canadian Mortgage Professional will provide an in-depth look at the RBC FHSA. We will start by discussing what the FHSA is. Then, we will help you get to know the RBC and focus on their FHSA offering.
Keep reading to find out if this new government program can help you attract more clients and partner with related industry professionals like financial advisors.
What is the FHSA?
The FHSA is a specialized savings plan designed to assist first-time homebuyers in preparing for the expenses while benefiting from tax advantages. It is a newly introduced registered account by the Canadian government.
Tax benefits
Having this account will make it easier for eligible individuals to build their savings for a property purchase. With an FHSA, your clients can grow their savings tax-free.
When they are ready to purchase a home, they can withdraw the funds without paying taxes. This makes it an effective tool for saving for a down payment for their first property.
How to know if my client is eligible to open an FHSA
To open an FHSA, your client must be at least 18 years old (or meet the legal age requirement in their province) and hold a Social Insurance Number (SIN).
They must also prove that they are first-time homebuyers. This means that they cannot own the house where they lived during the current year or in the previous four calendar years.
If your client meets these criteria, they can qualify to open an FHSA and begin saving for their future home.
Check out this clip to better understand how the FHSA works:
Want to dig deeper about the FHSA, its rules, and more? Check out this guide.
Getting to know the RBC
The RBC is one of the largest banks in Canada. They help people and businesses manage their money by offering services like bank accounts, loans, and credit cards. This banking giant was founded in 1864 and has grown to have over 1,200 branches across Canada and other countries.
As a financial company, the RBC helps its clients to save their money through chequing and savings accounts. As a mortgage provider, they assist their clients by offering a wide range of mortgage products for simple and unique cases.
They also offer credit cards that allow borrowers to shop now and pay later, sometimes with rewards like cash back or travel points.
In terms of insurance products, the RBC provides services for clients who want to cover their:
- homes
- cars
- health
- travel
With their online banking and mobile apps, clients can manage their money from anywhere easily. Besides banking, mortgage, and insurance, the RBC helps people invest their money in:
- stocks
- mutual funds
- exchange-traded funds (ETFs)
Clients can also grow their money through any of these tax-smart registered accounts:
- Tax-Free Savings Account (TFSA)
- Registered Retirement Savings Plan (RRSP)
- First Home Savings Account (FHSA)
Watch this video to learn how the RBC became a powerhouse in the financial industry:
We also have a company profile for RBC. Check out their history, culture, and more.
RBC FHSA: How it works
For those who want to buy property, it can be challenging due to high prices and limited options, especially if they are first-time buyers. Preparing for the initial deposit can take a toll on their finances. To help clients save money for a down payment, the RBC has also introduced their FHSA product.
Since the RBC FHSA is a type of registered plan, your clients can hold investments in it to help them reach their dream of buying a home more easily. They will also enjoy flexibility because the RBC FHSA has no minimum balance required.
They can simply open an account, and they will be given access to browse the full range of RBC’s investment products.
Who is eligible to open an RBC FHSA?
RBC has set three requirements for those who want to open an FHSA with them. To become eligible, your client must be:
- at least 18 years of age and no less than the age of majority in the province where they live
- a Canadian resident
- a first-time homebuyer
Your client and their spouse or common-law partner must provide evidence that they haven’t owned any property in their current place of residence. This must be within the calendar year in which they open an RBC FHSA or at any time in the preceding four calendar years.
How do I transfer money from RBC to FHSA?
The RBC has provided two options if your clients want to transfer their money to an FHSA. This can be through:
- online banking via RBC InvestEase dashboard
- RBC mobile app
It is best to assist your clients by connecting them with financial advisors. Partner with these industry professionals for referrals and network opportunities.
Key features of the RBC FHSA
As for its features, your clients’ contributions are tax-deductible. This can help them reduce their taxable income while saving for a home. Any funds and investment earnings in the FHSA grow tax-free, allowing clients to increase their savings faster.
When they are ready to buy a home, they can withdraw the money without paying any taxes, as long as it is used for a qualifying home purchase.
Your clients can open an RBC FHSA and contribute up to $8,000 per year, with a total lifetime limit of $40,000. If they don’t use the full $8,000 contribution in a given year, the remaining amount can be carried over to the following year.
How long before clients can use their money from their RBC FHSA?
Clients must use the funds in their FHSA within 15 years of opening the account or by the year they turn 71, whichever comes first. If they don’t buy a home by then, they can transfer the savings to an RRSP or Registered Retirement Income Fund (RRIF). This won’t affect their contribution room.
If they choose to withdraw the money instead, it will be taxed as income. As a mortgage broker, you can guide your clients on how to maximize the FHSA benefits and integrate it into their long-term homeownership plan.
Partnering with RBC financial advisors
Mortgage brokers can partner with RBC financial advisors or refer clients to open an FHSA while keeping them engaged for future mortgage needs. By staying in touch with clients as they grow their savings, they might consider hiring you when they are ready to secure a mortgage.
You can also try offering updates on market trends to keep your clients interested. They might be more inclined to rely on your services if you provide guidance on banking and interest rates. Tell them how these factors can affect their repayment structures before presenting a broader range of mortgage options.
Finally, use your knowledge of RBC FHSA as a leverage to market your services. You can also introduce them to your partner-advisers and ask the latter to refer them back to you when they’re ready to get a mortgage.
Do you know other ways to leverage the RBC FHSA to get more clients? Feel free to share them in the comments section below.
