Your Complete Guide to the First Home Savings Account

Buying a house for the first time is no easy feat in today’s market. Rising real estate prices and harder-to-obtain financing make this celebrated milestone more challenging than ever.

Nevertheless, the government does have some programs designed to help you, some of which are more helpful than others. One of the most recent programs that the Federal Government implemented is called the First Home Savings Account (FHSA). If you take advantage of it early enough, it is a highly valuable resource for making that all-important first purchase.

Though we’ve talked about first-time home buyer resources before, we really feel that this one deserves special attention. In this post, we’ll answer your most pressing questions about the FHSA.

Peterborough and the Kawarthas are both fantastic locations when searching for your first house! Download our detailed buying checklist to help you stay on track.

What Is a FHSA?

The First Home Savings Account was first introduced in 2023, shortly before the demise of the much less effective First-Time Home Buyer Incentive. Under the FHSA, you can start saving for your first home at age 18 by contributing up to $8,000 per year, to a $40,000 lifetime maximum, into a tax-free investment account.

It may seem “generous” of the government to let you access your own money. Irony aside, this is actually a hugely tax-advantaged account.

Are you making a plan to purchase your first home? Here are some more resources to get you started:

The FHSA Explained

How does a FHSA work? Ideally, it encourages you to save more of your income for your down payment. Not only that, but any investment growth can also go towards your purchase.

Like any investment account, the earlier you open and begin saving, the more you can benefit from compound interest. You may have a lifetime cap of $40,000, but if that initial investment grows by $10,000 over the years, it puts you at a major advantage. The tax free status is even more of a boost.

How Long Can an FHSA Be Open?

There is a definite FHSA time limit, although it is relatively generous. You have up to 15 years or until you turn 71 years old (whichever comes first), to make use of it. Once you buy your home, you have until the next calendar year to close the account and withdraw or transfer any funds.

There is even more good news. Unlike the Home Buyers’ Plan (HBP), there is nothing to repay. You buy your house, close your account, move in, and start deciding what colour to paint the walls and where to put your favourite artwork.

Can You Use an FHSA and RRSP Together?

Yes, you can use both an FHSA and an RRSP. If you’ve already been saving for retirement, you can make a withdrawal tax-free from your RRSP under the Home Buyers’ Plan (HBP). This allows you to pull up to $60,000 to put towards your home.

The only caveat is the Home Buyers’ Plan does have to be repaid within 15 years of your purchase.

Are you wondering where to buy your first home? There are a few reasons why Peterborough may be a contender. Learn more in the related reading below:

How Many FHSA Accounts Can I Have?

You can open as many FHSA accounts as you would like. However, there is no getting around the FHSA rules. Your FHSA contribution limits remain the same across all accounts, and you must close all of them within 15 years of opening your first account.

How to Open a First Home Savings Account:

Opening an FHSA is as easy and simple as any TFSA or RRSP. In fact, you could do it right now through your online banking account as long as you meet all of the criteria.

As we’ve already mentioned, you must be at least 18 years of age.
You must be a Canadian citizen or permanent resident.
You must not have purchased a qualifying home anywhere in the world in the current year or the previous four calendar years.
You must also intend to occupy your new home within one year of purchasing it.

Your bank may be the obvious choice, but you have other options. Credit unions, investment companies, and even some insurance companies all offer an array of products.

If in doubt, your financial advisor can make recommendations based on your goals and current resources. When used correctly, the First Home Savings Account is a valuable tool for becoming a homeowner in Canada.

Do you have more questions or want personalized guidance in taking your first step into the market? Our Peterborough real estate agents are here for you every step of the way. Reach out to team@jeffandkatie.ca or call 705-243-9797 to start the conversation today.