Everything You Need to Know About the First Home Savings Account in Canada
- Nadia Bove
- Oct 22
- 5 min read
Are you dreaming of owning your first home in Canada? If so, you’re not alone! Many Canadians aspire to buy their own homes, but saving for a down payment can be tough. Fortunately, the Canadian government has introduced a game-changing tool to help you save: the First Home Savings Account (FHSA). In this blog post, we’ll explore everything you need to know about the FHSA, including how it works, who qualifies, and how to set it up. Let’s jump right in!
What is the First Home Savings Account (FHSA)?
The First Home Savings Account (FHSA) is a unique savings account crafted for first-time homebuyers. This account merges the advantages of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA). Contributions to your FHSA are tax-deductible, allowing you to reduce your taxable income. Plus, any money earned in the account is tax-free when you withdraw it to purchase your first home.
The FHSA aims to make homeownership more attainable for Canadians, particularly younger individuals and families facing rising housing costs. According to recent statistics (September 2025), the average home price in Canada is approximately $672,784. In British Columbia, the average (July 2025) home price is approximately $942,686, making saving for a down payment even more crucial.
How Does the FHSA Work?
The FHSA helps you save efficiently for your future home. Here’s how it works:
Annual Contribution Limit: You can contribute up to $8,000 per year to your FHSA, with a total lifetime limit of $40,000.
Tax Benefits: Contributions to your FHSA are tax-deductible, potentially leading to tax savings.
Tax-Free Growth: Any investment earnings in your FHSA grow tax-free.
Withdrawals: Upon purchasing your first home, you can withdraw funds from your FHSA tax-free, provided you meet specific conditions.
If you have an RRSP set up, you can also combine your FHSA savings with your funds from the RRSP Home Buyers' Plan (HBP). With the HBP, you can borrow up to $35,000 from your RRSP to put toward your first home. Add in up to $40,000 from your FHSA, and you could have $75,000 to use for your down payment. The bonus? You don't have to pay back the money from your FHSA like you do with the HBP when using the funds to purchase a home.
Who Qualifies for the FHSA?
Opening an FHSA is simple if you meet these basic requirements:
Age: You must be at least 18 years old (and younger than 71) to open an FHSA.
First-Time Homebuyer: As per the Canada.ca website, you’re considered a first-time home buyer if neither you nor your spouse or common-law partner have owned and lived in a qualifying home in the past four years. You must also not have lived in a qualifying home owned by you or your spouse during the year you open the account. So, if you sold your home more than five years ago, or you currently own a property but don’t live in it as your primary residence, you may still be eligible to open an FHSA.
Canadian Resident: You need to be a Canadian resident for tax purposes.
Contribution Limits: You must stay within the contribution limits mentioned earlier.
If you satisfy these points, you may be eligible to start saving for your first home with an FHSA.
How to Set Up Your FHSA
Setting up your First Home Savings Account is straightforward. Here’s how:
Choose a Financial Institution: You can open an FHSA at various financial institutions, such as banks, credit unions, and online brokers. Look for the institution that offers the best interest rates and services.
Complete the Application: After selecting a financial institution, fill out an application form. You can usually do this online or in person.
Provide Required Documentation: Be ready to submit identification and proof of your eligibility as a first-time homebuyer. This might include your driver’s license, Social Insurance Number (SIN), and relevant documents.
Fund Your Account: Once your application is approved, you can start contributing to your FHSA, aiming to hit that $8,000 yearly limit.
Monitor Your Savings: Keep track of your contributions and savings growth. Most financial institutions offer online tools to help you manage your account easily.
Depositing Money into Your FHSA
Putting money into your FHSA is easy. Here's how you can do it:
Set Up Automatic Contributions: Many institutions let you set up automatic transfers from your checking account. This approach ensures that you save consistently without having to think about it.
Make One-Time Contributions: If you receive a work bonus or tax refund, consider making a one-time deposit to your FHSA. This strategy can significantly boost your savings.
Track Your Contributions: Keep tabs on your yearly contributions to avoid exceeding the $8,000 annual limit or the $40,000 lifetime cap.
Withdrawing Money from Your FHSA
When it’s time to buy your first home, withdrawing funds from your FHSA is straightforward:
Eligibility for Withdrawal: To withdraw tax-free, you must be purchasing your first home and meet government criteria.
Provide Documentation: Expect to show proof of your home purchase, such as a purchase agreement or mortgage documents, to your financial institution.
Withdraw Funds: After confirming your eligibility, you can withdraw funds from your FHSA without any tax implications, allowing you to use the money for your down payment.
Tips for Maximizing Your FHSA
To make the most of your First Home Savings Account, consider these simple strategies:
Start Early: Begin saving as soon as you’re eligible. The sooner you start, the more your money can grow.
Contribute Regularly: Whether you save a little or a lot, make it a habit to regularly add to your FHSA. Even small contributions can significantly impact your savings over time.
Leverage Tax Benefits: Don’t forget to claim your FHSA contributions on your tax return. This simple step can lead to extra savings that boost your overall contributions.
Stay Informed: Keep an eye on any updates regarding the FHSA program. The government may introduce new benefits that can enhance your savings strategy.
Your Path to Homeownership
The First Home Savings Account is an excellent option for anyone looking to buy their first home in Canada. By understanding how it works, who qualifies, and how to set it up, you can take steps toward achieving your homeownership dreams.
Start saving early, contribute consistently, and utilize the tax benefits provided by the FHSA. With the right planning and support, your dream home could soon be within reach.
Happy saving, and best of luck on your journey to homeownership!
If you have any questions, reach out any time. Always happy to chat mortgages!
Nadia.
604-831-4883
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