The New Tax-Free First-Time Home Savings Account – Can it Help You?

There’s help for buying your first home

The Federal Government launched the Tax-Free First Home Savings Account (FHSA) on April 1st. The intention of this new account is to act as a valuable tool for prospective homeowners to save for their first home.

As we all know, affordability has become more difficult, especially over the last decade. If you’re looking to buy a new home in a major Canadian city such as Toronto, or in the surrounding areas that make up the GTA, you’ve been faced with:

  • High housing prices
  • Low housing inventory
  • Increased demand for homes
  • Job losses or reduced income due to the pandemic

All of the above have combined to make saving enough money for a Down Payment on a first home both a frustrating and disheartening exercise.

With so many Canadians clamouring for an answer or even something to assist them with buying their first home, this account might finally be part of a solution.

What is the Plan?

As long as you’re a Canadian of 18 years of age, you can open this first home savings account. It allows you to save up to $40,000 for your first home.

Once you open your account, you can save up to $8,000 each year for up to 15 years (December 31 marks the end of each year’s contributions). When the 15 years are up, you must use the funds or the account will be closed.


Say you are able to save the $40,000 maximum and you invested that amount. Whatever interest you gained on that $40,000 would be yours tax-free. Whether that interest is $5,000, or even $25,000, all of that money is eligible to be used toward your first home purchase.

Every dollar that you put into this account goes towards your first home. And no repayment is required.


The criteria are straightforward. You must:

  • Be a resident of Canada
  • Be at least 18 years of age (or the age of majority in your Province or Territory)
  • Not have previously owned a home at any time in the years in which the account is open; or during the previous four calendar years from account opening

You are not eligible:

  • If your spouse’s property has been your principal place of residence during the year that the account is opened or within the previous four years
    • However, if you and your spouse happen to separate and don’t live in that residence for at least four yearsand you don’t buy another property on your own during that time, then you are eligible to open an FHSA

And if you no longer have a spouse who is an owner, and you have not owned your main accommodations for over 4 years, you’re also then eligible to open an FHSA.

Other Things to Know About Saving for Your First Home

  • You can hold your FHSA for up to 15 years or until you are 71 years old
    • You have until December 31 of the year when you either reach the 15th anniversary of your account opening or when turn 70 to use your FHSA to buy your first home
  • Your account must be closed by December 31 of the year following your first qualifying withdrawal date
  • Any money left over in your FHSA can either be transferred (tax-free) to an RRSP or RRIF without affecting your contribution ceiling.
    • You can also withdraw the money, subject to tax withholding, and deposit it into a chequing account
    • You can also reinvest any unused money in a TFSA

Other Tools for Your First Home

The existing Home Buyers Plan (HBP) is another program by the Federal Government. It allows First-Time Homebuyers to withdraw up to $35,000 from their existing Registered Retirement Savings Plan (RRSP) to use as a down payment on their first home. Whatever this amount is, it must be paid back over a period of 15 years.

You can also combine the FHSA with the HBP. So, in addition to making a withdrawal from your FHSA for either the purchase or the construction of your first home, you can withdraw up to $35,000 from your RRSP under the HBP program. If you’re a couple, you can combine each of your FHSA accounts with an HBP withdrawal. This will allow you to maximize your down payment.

Still have questions? Are you ready to move to the next stage? Let’s chat. Send me an email ( or text/phone (416-882-4707).

Photo by Sandy Millar on Unsplash