comScore
ADVERTISEMENT
Your browser is not supported. We do our best to optimize our websites to the most current web browsers. Please try another browser.
Skip to main content

What is a First Home Savings Account and How Does it Work?

couple getting the key to their new home
Getty Images

We all know that buying a first home is difficult—and it’s not getting easier. According to the Canadian Real Estate Association (CREA), the average price for a home in Canada was $659,395 in January 2024. That’s an increase of 7.6 per cent in just the last 12 months. And average prices in Toronto and Vancouver? They’re both north of $1 million.

ADVERTISEMENT

With real estate costs like these, you may wonder how you’ll ever scrape together a decent down payment and become a first-time homebuyer in Canada. If you’re lucky, you might get some help from family. But most of us have to do it the hard way: save, save and save some more. That’s where the First Home Savings Account (FHSA) comes in.

Introduced by the federal government in 2023, an FHSA is a registered savings plan designed to help first-time homebuyers save up to $40,000 for a down payment on their first home, tax-free. It shares some similarities with Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs).

a model house on a bed of money
Getty Images

Related: The Average Cost to Rent a One-Bedroom Apartment in Canada

Who Is It For?

As its name suggests, a First Home Savings Account (Canada) is designed for those buying their first home. Several conditions must be met to open an account. These include:

• Being of legal age or older (18 or 19, depending on your province or territory)
• Being 71 years of age or younger by December 31 of the year you open the account
• Being a Canadian resident
• Not living in the qualifying home in the same calendar year (or four previous years)

couple using a computer
Getty Images

What Are the Benefits?

FHSAs are a tax-free way to save for your first home. Contributions are tax-deductible, and you may contribute (or transfer from an RRSP) up to $8,000 per year, up to a lifetime maximum of $40,000 for all FHSAs. Unused contribution room from any year can be carried forward, and any income gained inside the FHSA doesn’t affect the contribution limits.

Related: How to Save for a Down Payment in These Canadian Provinces

ADVERTISEMENT

Who Offers FHSAs and How Do I Get One?

FHSAs are widely available from banks, credit unions, trusts and insurance companies. To be considered a qualified investment, the issuer’s offering must meet government criteria, similar to investments qualifying as RRSPs.

There are three kinds of FHSAs:

• Depository FHSA: Your investment is held in an account with your provider
• Trusteed FHSA: A trust holds your investment
• Insured FHSA: An annuity contract with a licensed provider

If you prefer, you can self-direct your FHSA.

To open a FHSA, choose a provider and an FHSA that suits your needs. The provider will need information to register the FHSA, including your SIN, date of birth and documentation showing you’re a qualified individual.

Related: Buying an Older Home? Watch Out for These Red Flags

couple looking at condos
Getty Images

How Do You Withdraw Your Savings?

Qualifying withdrawals are not considered income if they are used to buy a qualifying home and meet withdrawal criteria. The same applies to designated withdrawals of excess contributions. If the withdrawal is considered a taxable withdrawal, it must be counted as income.

A qualifying withdrawal must meet these conditions:

• You must be a first-time homebuyer
• You must have a written contract to buy or build the qualifying home
• You must not have bought the home more than 30 days before withdrawal
• You must be a resident of Canada
• You must occupy the home as your primary residence within one year of purchase or construction
• You must fill out the proper paperwork for your FHSA issuer

You may also transfer FHSA funds to an RRSP, RRIF or another FHSA. Taxable withdrawals may be made, but these must be reported as income and the amount withdrawn is subject to tax withholding.

Related: The Cheapest Places to Live in the World in 2024

ADVERTISEMENT

While a FHSA may sound complicated, it’s quite similar to an RRSP. FHSAs are an easy way to save a significant down payment for a new home, free from a tax burden— and your money grows inside the FHSA. Your financial provider can help you with the details. And before you know it, you’ll be on your way to owning your first home.



Latest News

Bryan helps Brewer's Village in Kenora, Ontario become the new local hotspot.
April 16, 2024
Shopping for furniture? These are some of our favourite Canadian furniture stores this year.
April 16, 2024
While there are many benefits to living in Toronto, affordability unfortunately is not one of them.
April 15, 2024
Crafting a piece of furniture for your house is a beautiful thing but does it really save you money?
April 15, 2024
Throw on your most cottage-core attire and join Scott and Debra for a fun-filled day.
April 12, 2024
Etsy has officially launched their spring and summer trend guide for 2024 and it's blooming with personality.
April 11, 2024
This handmade beauty will transform a cold bathroom into a cozy escape.
April 10, 2024
A special guest helps Bryan transform the Riversea Motel into the ultimate getaway.
April 9, 2024
We’ve rounded up a province-by-province collection of stunning Canadian flora.
April 9, 2024
ADVERTISEMENT
ADVERTISEMENT
This content is restricted to adults of legal age.
Please enter your birthdate to confirm.
Date of Birth