Buying your first home is an exciting time! From finding the right space to create your future memories to saving enough to cover all the housing costs, there is a lot to consider. As you save towards your goal of purchasing your first home, there are different resources you can use to help make achieving your homeownership goals a little easier. One useful tool first-time homebuyers can use is the First Home Savings Account (FHSA). In this article, we’ll go over everything you need to know about the FHSA and how to use it effectively on your journey to your first home!
What is the First Home Savings Account?
Introduced in 2023, the FHSA is a registered plan that allows first-time home buyers to save money tax-free to buy or build their first home. Like a Registered Retirement Savings Plan (RRSP), contributions are tax-deductible. Withdrawals to purchase a first home, including any investment income earned, would be non-taxable, like withdrawals from a Tax-Free Savings Account (TFSA).
What are the benefits of saving with a First Home Savings Account?
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Tax-Free |
Diversify |
Flexibility |
Who is eligible for the First Home Savings Account?
The FHSA is available to residents of Canada buying their first home who are at least 18 or 19 years old, depending on the province or territory in which they live. You must also be younger than 71 years of age as of December 31st of the year you open your FHSA.
To be eligible for the account you must be a first-time home buyer. This means neither you or your spouse/common-law partner lived in a qualifying home owned or jointly owned by either person. This applies for the year the FHSA account is opened and during the 4 years before.
Quick Tip
If you already own an investment property that you do not live in as your primary residence, you may still be eligible to use an FHSA to purchase your first home.
Contributing to a First Home Savings Account
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Annual Contribution Limit |
Lifetime Contribution Limit |
Every year, participants are able to contribute up to $8,000 to their FHSA. You can contribute to an FHSA with any financial institution, like a bank or credit union, that offers a registered FHSA product. Similar to a TFSA or RRSP, the FHSA is simply the categorization but the way you invest money in the FHSA is up to you. Depending on factors like your timeline and risk tolerance, you can explore different investment options to help your FHSA funds grow.
After opening an FHSA, unused contribution room can be carried forward to the next year, up to a maximum of $8,000.
Let’s look at an example:
| Year | 2025 | 2026 |
|
Contribution Room |
$8,000 |
$8,000 + $5,000 = $13,000 |
|
Amount Contributed |
$3,000 |
$4,000 |
|
Carry-Over Amount |
$5,000 |
$8,000 |
Based on this example, the FHSA account holder would be able to contribute $8,000 for 2027 plus $8,000 in carry-over contributions from 2026. Although they didn’t contribute the full amount of $13,000 in 2026, the additional $1,000 cannot be carried over for another year as the maximum annual contribution including carry-over amounts is $16,000.
Quick Tip
You can have multiple FHSA accounts with different financial institutions, but you can’t exceed the annual and lifetime contributions limits.
What’s the withdrawal process when I’m ready to buy a home?
Found that special place you’d like to call home? It’s time to put your savings to good use! To make a qualifying withdrawal from your FHSA, there are certain criteria you’ll need to meet:
- You must fill out Form RC725, Request to Make a Qualifying Withdrawal from your FHSA and give it to your FHSA issuer
- You must be a first-time home buyer for purposes of making a qualifying withdrawal
- You must have a written agreement to buy or build a qualifying home with the acquisition or construction completion date of the qualifying home before October 1st of the year following the date of the withdrawal
- You must not have acquired the qualifying home more than 30 days before making the withdrawal
- You must be a resident of Canada from the time that you make your first qualifying withdrawal from one of your FHSAs until the earlier of the acquisition of the qualifying home, or until you pass away
- You must occupy or intend to occupy the qualifying home as your principal place of residence within one year after buying or building it
Quick Tip
After making a qualifying withdrawal, you’ll have until December 31st of the year following the withdrawal to close your FHSA account.
How long can I have an FHSA?
While the FHSA is a useful tool to save for your first home, there is a time limit on how long you can keep the account open and benefit from its features. From the time you open an FHSA, you have 15 years to use the funds you’ve accumulated for a down payment on your first home, this is called the maximum participation period.
What happens after 15 years?
Option 1: Any unused funds in the FHSA can be transferred tax free to an RRSP or a Registered Retirement Income Fund (RRIF) (if the account owner is older than 71) by December 31st of that year
Option 2: Funds can be withdrawn and will be taxable
Reaching Your Homeownership Goals with the First Home Savings Account
Owning a home is a great goal to strive towards and with the right tools and resources, it will be even easier to accomplish. Whether you’re just starting your journey or you’re ready to explore mortgage options, working with a mortgage broker is a great decision. Use our Find a Broker Tool to get in touch with a broker near you.