What is a First Home Savings Account (FHSA)— and How Does It Work?
Saving for your first home can feel like an uphill battle — especially with rising real estate prices, higher interest rates and the challenge of putting together a solid down payment. But there’s a powerful tool that can make the process easier: the First Home Savings Account (FHSA).
In this blog post, I’m breaking down exactly how the FHSA works, who qualifies, how much you can contribute, your investment options, and what happens if you don’t end up buying a home.
What is an FHSA?
The First Home Savings Account combines the best features of the RRSP and TFSA into one powerful savings tool for first-time homebuyers.
Like an RRSP, your contributions are tax-deductible, which means you can lower your taxable income when you contribute.
Like a TFSA, your withdrawals are tax-free, as long as you’re using the money to buy your first home.
It’s truly the best of both worlds!
Who Can Open an FHSA?
To be eligible, you must:
Be 18 years or older.
Be a Canadian resident.
Be a first-time home buyer (You haven’t lived in a qualifying home as your principal residence, either on your own or in one that was owned or jointly owned by your common-law partner).
FHSA Contribution Limits
You can contribute up to $8,000 per year.
The lifetime contribution limit is $40,000.
Unused contribution room carries forward, so if you don’t contribute the full $8,000 in a given year, you can make up for it in the future.
FHSA Investment Options
You can open an FHSA account at most banks, credit unions, and online brokerages. Once opened, you can invest your funds in:
GICs (Guaranteed Investment Certificates)
Bonds
Stocks
Mutual funds
Exchange Traded Funds (ETFs)
This flexibility allows your money to grow faster than it would in a regular savings account.
What If You Don’t Buy a Home?
If your plans change and you don’t end up using your FHSA to buy a home, you’ve still got options:
Transfer the funds to your RRSP (without using your RRSP contribution room). The funds will be taxed when you withdraw them from the RRSP later.
Withdraw the funds directly, but note: this option is fully taxable, and the entire amount will count as income for that year.
Final Thoughts
As someone passionate about helping people build wealth and achieve big goals, I think the FHSA is one of the most underrated financial tools available to Canadians right now.
Whether you're starting from zero or already saving toward a down payment, the First Home Savings Account can seriously fast-track your path to homeownership.