TFSAs. RRSPs. And now FHSAs.

The alphabet soup of investment savings accounts for Canadians looking to buy their first home can seem daunting. Experts say each have their advantages B次元官网网址� and limits.

The tax-free first home savings account (FHSA), unveiled by the federal government in its budget earlier this month, offers a new way for aspiring owners to make a down payment on their first property.

Available starting next year, it aims to combine the advantages of the existing tax-free savings account (TFSA) and the registered retirement savings plan (RRSP).

Contributions to an FHSA will be tax-deductible, like with an RRSP. Withdrawals from an FHSA, including capital gains, to buy a home will be non-taxable B次元官网网址� similar to a tax-free savings account.

B次元官网网址淚tB次元官网网址檚 almost like a hybrid between the two, but on steroids,B次元官网网址� said Tim Cestnick, a tax and personal finance expert and CEO of Our Family Office Inc.

First-time homebuyers can tuck away up to $8,000 in that savings account annually B次元官网网址� unused contribution room cannot be rolled over to the next year B次元官网网址� with a lifetime cap of $40,000.

B次元官网网址淭he first home savings account is going to be the better plan for the majority of people,B次元官网网址� Cestnick said.

In contrast, the RRSP home buyersB次元官网网址� plan allows first-time purchasers to funnel no more than $35,000 toward a down payment, and the withdrawal has to be B次元官网网址渞epaidB次元官网网址� within 15 years.

B次元官网网址淵ou really have nothing to lose by setting up one of these first home savings accounts. Either youB次元官网网址檙e going buy a home and youB次元官网网址檙e going to get the benefit of the tax-free withdrawal and the deduction you got when you put the money in B次元官网网址� and the growth over the years B次元官网网址� or youB次元官网网址檙e not going to use it and youB次元官网网址檙e going to transfer it to your RRSP tax-free,B次元官网网址� Cestnick said.

That last allowance also goes the other way, as RRSP holders can transfer cash to the FHSA without being taxed on the withdrawal.

While $40,000 is the maximum contribution for the FHSA, that investment will likely gain value. The account can store everything from stocks and bonds to cash and exchange-traded funds.

Even if that 40 grand doubles in value, however, the bolstered purchasing power still may not be enough to compete in white-hot housing markets like Vancouver or Toronto. Also, given that contributors can only add $8,000 annually, an FHSA would not substantially pad out the pocketbook for several years.

But that might mesh with younger Canadians who donB次元官网网址檛 plan to leap into the market just yet.

B次元官网网址淪omebody whoB次元官网网址檚 even 18 or 19 years old who starts a job doing construction or something where theyB次元官网网址檙e able to get right into the workforce B次元官网网址� those Canadians can effectively save more money, because they might still be living with mom and dad, they might be renting low cost,B次元官网网址� said Leah Zlatkin, a mortgage expert at LowestRates.ca.

The first home account also makes sense for properties that fall far below the average home price in Metro Vancouver or the Greater Toronto Area B次元官网网址� $1.36 million and $1.30 million respectively in March B次元官网网址� says Sung Lee, a mortgage expert with Ratesdotca.

B次元官网网址淲here home values in general exceed a million dollars, itB次元官网网址檚 going to be tough,B次元官网网址� he said, noting they require a 20 per cent down payment.

B次元官网网址淏ut for someone who is looking at a property of, letB次元官网网址檚 say, $650,000 or below this would benefit them, because essentially you have to put down five per cent on the first $500,000 ($25,000) and then 10 per cent on the balance ($15,000). So if you take $40,000 B次元官网网址� the maximum amount that you could contribute into this account B次元官网网址� that would equate to a purchase price of $650,000.B次元官网网址�

The FHSA and the RRSP home buyersB次元官网网址� plan cannot be used simultaneously, he noted.

For current homeowners looking to size up, neither the FHSA nor the RRSP is applicable. Cestnick says they should consider the more flexible, all-purpose tax-free savings account, which allows annual contributions of up to $6,000, with unused room carrying forward.

An alternate route is renovating the residence to boost its value, especially since gains on the sale are tax-exempt, he noted.

The tax-free savings account can also come into play for those with more than $8,000 to invest, with spillover from that FHSA cap flowing into a TFSA.

B次元官网网址淚tB次元官网网址檚 a matter of priority. If your longer-term goal is to make sure that I have this nest egg for retirement, youB次元官网网址檙e going to put your extra savings into an RRSP. But if your shorter-term goal is to get into your first home, then you want to take advantage of the new savings account,B次元官网网址� Lee said.

Would-be buyers should resist any urge to pour money into these tax shelters by taking out debt, Zlatkin noted.

B次元官网网址淢aybe you actually want to pay off those credit card bills, try to spend a little bit less on consumer goods and restaurants B次元官网网址� and work out a household budget,B次元官网网址� she said.

B次元官网网址淭hen think about houses.B次元官网网址�

B次元官网网址擟hristopher Reynolds, The Canadian Press