Investment
The Smart Way to Save for Your First Home in Canada
Let’s talk about one of the most exciting financial tools available to Canadians today: the First Home Savings Account, or FHSA. If you’re dreaming of buying your first home, this account isn’t just helpful—it’s a game-changer. It’s designed to give you a serious leg up, combining the best features of both the RRSP and the TFSA into one powerful, purpose-built plan.
Here’s how it works. The FHSA allows you to contribute up to $8,000 per year, with a lifetime maximum of $40,000. And the moment you put money in, you get a tax deduction—just like you would with an RRSP. That means your taxable income goes down, and you save money on your taxes today. But unlike the RRSP, when you withdraw the money to buy your first home, you don’t pay a cent in tax. Not on the original contributions, and not on any of the investment growth. It’s a rare double win: tax-deductible going in, tax-free coming out.
And it gets better. You can invest your FHSA funds in a wide range of assets—stocks, ETFs, mutual funds, bonds, GICs, even cash. So while you’re saving for your home, your money can be working for you, growing tax-free in the background.
Now, what if you don’t end up buying a home? No problem. You can transfer the funds into your RRSP or RRIF without triggering any tax. You keep the tax shelter, and you don’t lose the benefit. It’s flexible, forgiving, and built to support your long-term financial goals.
But the real power of the FHSA comes when you combine it with the RRSP Home Buyers’ Plan (HBP). The HBP allows you to withdraw up to $35,000 from your RRSP to buy a first home, tax-free—as long as you repay it over 15 years. That’s a solid tool, but when paired with the FHSA, it becomes a down payment strategy that’s hard to beat.
Imagine this: you and your partner each max out your FHSA at $40,000, and you each have $35,000 in your RRSPs. That’s $150,000 total you can use toward your first home—$80,000 of it completely tax-free and not repayable, and $70,000 tax-free with a manageable repayment schedule. That kind of leverage can make the difference between settling and securing the home you really want.
Let’s take Alex and Maya as an example. They’ve been saving diligently, contributing $8,000 a year to their FHSA for five years. Along the way, they’ve also built up their RRSPs. When they’re ready to buy, they withdraw $40,000 each from their FHSA—no tax, no strings attached. Then they tap into their RRSPs through the Home Buyers’ Plan, pulling another $35,000 each. That gives them $150,000 toward their down payment, and they’ve done it all within the rules, maximizing every available benefit.
Of course, there are a few things to watch out for. FHSA contributions are capped, and over-contributing can lead to penalties. Withdrawals must be used for a qualifying home purchase, or they’ll be taxed like regular income. And while RRSP withdrawals under the HBP are tax-free, they do need to be repaid over 15 years—or they’ll be added to your taxable income.
But when used strategically, the FHSA is one of the most powerful tools in the Canadian financial landscape. It’s not just about saving—it’s about building wealth with purpose. It’s about turning your dream of homeownership into a concrete, achievable plan.
We can help you make the most of these tools—not just by opening the accounts, but by aligning them with your goals, your timeline, and your future. Because buying your first home shouldn’t just be exciting—it should be financially empowering
