All about the First Home Savings Account (FHSA)

What is an FHSA?

An FHSA is a registered savings account that allows prospective first-time home buyers to save up to $40,000 that can be used toward the purchase of a home. Contributions made to the FHSA are tax-deductible and withdrawals used to purchase a first home, including the investment income, are non-taxable.

Who qualifies for an FHSA?

To open an FHSA, a member must be

a resident of Canada
at least 18 years of age
a first-time home buyer

A first-time home buyer is defined as an individual who has not owned a home in which they lived at any time during the calendar year prior to opening the account, or at any time during the preceding four calendar years.

Is there a limit to how much a member can contribute to an FHSA?

Annual contributions are capped at $8,000 with a lifetime contribution limit of $40,000.

Unused contribution room from one year can be carried forward to the next year. So, for example, if an individual contributed $2,000 one year, they could carry an additional $6,000 into the next year, making their annual contribution limit a total of $14,000 that year.

You can open more than one FHSA, but the total annual contribution remains $8,000 per year.

How does the FHSA work, exactly?

You can have an FHSA for a maximum of 15 years, or until you turn 71 years old, whichever comes first. The account can remain open during that time, or until the end of the year following a qualifying withdrawal for the purchase of your first home. To make a qualifying withdrawal, you must

be a resident of Canada purchasing your first home
have a written agreement to buy or build a home in Canada before October 1 of the year following the withdrawal
occupy that home as your principal place of residence within one year of purchase or building

You may make a qualifying withdrawal from your FHSA all at once or in a series of withdrawals.

Any savings you don’t use to purchase or build your first home can be transferred to a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF). Funds will be subject to tax upon withdrawal from those accounts, according to the applicable rules. If you choose to withdraw unused savings from the FHSA, those funds would be subject to taxes at the time of withdrawal.

Ways to get more from your FHSA?

1. Tax-free savings, tax-free withdrawals

Whether you’re just starting to think about saving for your first home or you’ve already begun your saving journey, the new FHSA provides the tax-reduction benefits of an RRSP with the tax-free growth of a TFSA. Contributions and interest earned are non-taxable when withdrawn and used toward the purchase of your first home, which means you can keep more money in your pocket.

Hot tip: Accelerate your savings by combining an FHSA contribution with your TFSA savings and your RRSP through the Home Buyers Plan (HBP).

2. Choose your investment option

Choose how you want to save based on your unique saving goals. Contribute monthly and watch your savings grow with a variable rate FHSA or take advantage of higher interest rates with a GIC, available in 1- to 5-year terms. Or, enjoy the best of both worlds by contributing to a variable rate FHSA throughout the year and then locking your funds into a GIC term.

Hot tip: Easily set up equal automatic deposits and you’ll never have to worry about going over your annual or lifetime contribution limits. Call 1.800.728.6440 to get started today.

3. Set yourself up for mortgage success

An FHSA can bring you peace of mind by allowing you to focus on what really matters—finding your dream home. When you’re ready to purchase your first home, our SCU lending specialists will guide you through the process of exploring the mortgage solution that’s right for you.

Hot tip: When it’s time, your pre-approval meeting is a great opportunity to ask questions and explore your mortgage options. Download this checklist to help you get ready to meet with your SCU lending specialist.