Transcript:
In today’s training, we’re going to review how to enter an FHSA and how to use it to fulfill a future home purchase.
We’re going to start by clicking the plus button in the bottom-right corner and selecting Savings & Investments. From here, select the Investment section. Under Type, from the dropdown menu, choose Tax-Free First Home Savings Account.
We’ll select that as our option, give the account a name, and enter the current balance for the account.
You can adjust your fee rates here if needed, and you can also toggle on or off whether or not this account can be used for non-qualified expenses. I’m going to leave that turned off for now.
Under Contributions, enter how much the client is contributing to the account, either annually or monthly. You also have the option to prioritize these contributions before paying any other expenses. If you’d like to do that, simply toggle that option on.
Next, enter the purchase year for the account. You’ll also see account closure options. When the account closes, if there is any remaining balance, you can either:
- Liquidate it to savings, which moves the funds into the cash sweep accounts, or
- Transfer the remaining balance into a retirement account already in the plan.
For example, this client has an RRSP with their employer, so I’ll instruct the software to move any remaining FHSA balance into the RRSP once the account is no longer needed.
The next thing I want to point out is that when you enter contributions, you’ll be asked to update the timing for those contributions. This simply tells the software how long contributions should continue.
We’re going to start contributions now, and I already have a “First Home Purchase” event on the timeline, so I’ll use that as the end event for contributions.
Then we’ll click Done to save.
You can now see the FHSA in the Savings & Investments section. If you’d like to track it year by year, go to Year View and look under the Investments section. There, you’ll be able to see estimated end-of-year balances for each year in the plan.
Next, let’s review how to use this account for a future home purchase.
We’re going to click the plus button again, select Property, and create a new property entry. I’m going to leave the asset type as Principal Residence and call this “Future Property.”
Next, enter the estimated future market value. You can either:
- Enter the value in today’s dollars and allow the software to inflate it over time, or
- Select Future Value if you want the property to enter the plan at the exact amount entered.
I’m going to leave the market value and purchase value the same.
Then, toggle on Yes, this is a future purchase.
Once that’s enabled, we need to tell the software when the home is being purchased. Go to Timing, select the “First Home Purchase” event on the timeline, and drag that into the Buy Event field.
We’ll leave the sell event as Plan End for now.
Under Payment Sources, we want to make sure the FHSA is listed as a preferred payment source for this purchase.
Next, we’ll link the future mortgage associated with the property. Go to Linked Debts, select Create and Link a New Debt, and enter:
- A name for the mortgage
- The estimated balance
- The interest rate
- The loan term
The mortgage balance should represent the amount borrowed after the FHSA down payment is applied.
Once we enter the loan term, the software will estimate the payment amount automatically.
Click Done to save the debt, then click Done again to save the property.
Now let’s review the outputs.
In the year of the future home purchase, you can see a large spike in the cash flow chart. That’s coming from the purchase of the property.
In this example:
- $650,000 is flowing into the plan from the mortgage, and
- $100,000 is being withdrawn from tax-free savings through the FHSA.
Let’s review this in Year View.
If we scroll over to the purchase year and look under Cash Flow, we can see:
- A credit from the future mortgage, and
- A $100,000 withdrawal from Angela’s FHSA.
You can also go to the Investments section to see the FHSA details, including:
- The withdrawal amount, and
- The remaining end-of-year balance.
If we go to the Property section, we can see that the new property has now entered the plan in that year.
Finally, under Expenses, you can review the future property purchase itself. If you click on the purchase, you’ll be able to see exactly where the funding came from. You’ll notice that Angela’s FHSA is highlighted as a preferred funding source.
I hope that was helpful. If you have any questions, you can always reach out to us at support@planwithvoyant.com, or click your client’s name in the top-right corner, select Request Support, enter your question into the text box, and share client access.
Thanks for listening.