How to Open a First Home Savings Account (FHSA) in Canada

The First Home Savings Account (FHSA) is an effective instrument for Canadians who want to purchase their first home. This type of tax-free savings account was introduced in 2023 and has the advantages of both RRSPs and TFSAs, including tax-deductible contributions and tax-free withdrawals for home purchases. This is a guide on opening an FHSA in Canada, including eligibility, the steps, contributions, investments, and more, to assist first-time home buyers in attaining their objectives. An FHSA has the potential to increase your down payment savings substantially with the right strategy. For a deeper understanding of tax-advantaged accounts, explore our guide on claiming tax deductions and credits in Canada. 

What is a First Home Savings Account (FHSA)? 

The FHSA is a registered savings plan that assists Canadians in saving towards their first home. Like an RRSP, contributions are tax-deductible, and withdrawals to purchase a qualifying home are tax-free, like a TFSA. The Canada Revenue Agency (CRA) explains that the FHSA enables you to save a maximum of $40,000 in your lifetime, and the maximum amount you can contribute towards the FHSA per year is $8,000.  The account can remain open up to 15 years or until you reach 71 years of age, whichever comes first, which makes this a flexible option for young Canadians who want to plan ahead. To learn more about key tax benefits for 2025, check out tax deductions and credits every Canadian needs to know about.

Unlike the RRSP Home Buyers Plan, which must be repaid, FHSA withdrawals to purchase a home do not have to be repaid, providing more financial flexibility. This is why the FHSA will be a desirable choice among people navigating or operating in the competitive housing market in Canada in 2025.

Eligibility Requirements for an FHSA

In order to open an FHSA, you have to meet certain requirements set by the Government of Canada. These include:

• Residency: You have to be a Canadian resident.
• Age: You should be between 19 and 71 years old. It is important to note that not all provinces allow you to open an FHSA at the age of 18, with British Columbia being one of them because of the legal age limit.
• First-Time Home Buyer Status: You are a first-time home buyer when you, or your spouse or common-law partner, have never owned a home in which you lived in the year you open the FHSA or in any of the four calendar years before that. For example, in 2025, you should not have owned a home since 2021.
• Tax Filing: You must have a valid Social Insurance Number (SIN), and you must file taxes in Canada to claim contribution deductions.

You may qualify even though you have owned a home in the past, provided you have not owned a home in the last four years. Consult a financial advisor to check your eligibility or refer to the guidelines provided by the CRA to get clarity. For more on the FHSA’s unique features, see our detailed overview of the tax-free First Home Savings Account (FHSA).

How to Open an FHSA

It is easy to open an FHSA and, just like any other registered account, such as a TFSA or RRSP. Follow these steps to get started:

• Select a Financial Institution: FHSAs are available at numerous Canadian banks, credit unions, and investment sites. Some of the biggest providers, including RBC, Scotiabank, and Questrade, offer FHSA accounts with different features, including self-directed investing or managed portfolios. Before making a decision, compare fees and investment options, and customer service. To have a convenient user experience, you may take a look at robo-advisors such as  Wealthsimple, which also offers socially responsible investing options as outlined in How to Choose the Right SRI Robo-Advisor.
• Check Eligibility: Enter your SIN and verify that you are a first-time home buyer. There are institutions that might require extra identification or residency evidence.
• Fill out the Application: The majority of providers offer online applications on their websites or mobile applications. With traditional banks, you might have to go to a branch to set up in person.
• Fund Your Account: Deposit funds into your FHSA once it is approved. You can transfer funds from a chequing account, TFSA, or RRSP, but ensure not to exceed the annual contribution limit.
• Claim Tax Deductions: Claim all your FHSA contributions on your tax return to minimize your taxable income. The CRA allows deductions in the year of contribution or carries it forward to future years.

It normally takes a couple of days to open an FHSA, depending on the processing period of the institution. Make sure you read the terms and conditions to avoid any unexpected fees or charges.

FHSA Contribution Rules

It is important to understand the FHSA contribution limits to make the most of it. Some of the most important rules are:

• Annual Limit: You will be able to contribute up to $8000 annually, beginning the year you open the account.
• Lifetime Limit: There is a maximum contribution limit of $40,000 per person.
• Carry-Forward Room: Contribution room that is unused is carried forward to the following year, up to the annual limit of $8,000. For example, when you contribute $5,000 in 2025, you can contribute 11,000 in 2026 (8,000 + 3,000 unused room).
• Tax Deductions: Contributions will lower your taxable income like RRSPs. For example, a 2025 contribution of $5,000 might save you one thousand to two thousand dollars in taxes, depending on your tax bracket.
• Over-Contributions: Contributing more than the limit attracts a 1 percent monthly penalty on the excess amount, according to the CRA.

To ensure that you do not incur any penalty, monitor your contributions through the portal of your financial institution or the My Account service of the CRA.

FHSA Investment Options

An FHSA will allow you to invest in a variety of ways to grow your savings tax-free, just like TFSAs and RRSPs. Popular options are:  

• Guaranteed Investment Certificates (GICs): Risk-free fixed-rate investments that are suitable for risk-averse investors. BMO offers competitive FHSA GIC rates.
• Exchange-Traded Funds (ETFs): Diversified investments with low cost that can be used for long-term growth. Self-directed ETF investing is available on platforms such as Questrade.
• Mutual Funds: Funds that are professionally managed and are suited to individuals who prefer professional management. This can be found in banks such as Scotiabank.
• Stocks and Bonds: More risky investment opportunities are typically suitable for experienced investors and are best suited for self-directed FHSAs on platforms like Wealthsimple.

Select investments depending on your risk tolerance and the time frame you have to purchase a house. A financial advisor can assist you in customizing your FHSA portfolio to achieve a balance between growth and security. For broader strategies on portfolio diversification, read our guide on how to build a diversified investment portfolio in Canada.

FHSA Withdrawal Rules

Withdrawals made on an FHSA are not taxed when applied to a qualifying home purchase. Key conditions include:

• Qualifying Purchase: The home must be a residential property in Canada and you must have the intention of residing in it as your main house within one year of purchase.
• Timing: You have to sign a written contract to purchase or construct the house prior to October 1 of the following year of withdrawal.
• Non-Qualifying Withdrawals: Withdrawals that are not used to purchase a home are taxed as income, just like RRSP withdrawals.

In case you do not purchase a home, you can transfer the FHSA funds into an RRSP or RRIF without impacting your RRSP contribution room.

FHSA vs. RRSP and TFSA: Which is Best?

The FHSA complements other savings plans such as RRSP, Home Buyers Plan, and TFSA. Here’s a quick comparison:

• FHSA: Contributions are tax-deductible, tax-free withdrawals to purchase a home, and no repayment is required.
• RRSP Home Buyers Plan: Allows one to borrow up to $35,000 tax-free to buy a home but it must be repaid within 15 years.
• TFSA: Allows tax-free withdrawals without restrictions for any purpose and no tax deductions on contributions.

Combining these accounts can maximize your down payment. For example, contributing to an FHSA and TFSA simultaneously provides flexibility, while the RRSP Home Buyers’ Plan can supplement larger purchases.

Conclusion

Opening a First Home Savings Account in Canada is a wise move for first-time home buyers in 2025. The FHSA will help you reach your goal of homeownership faster, with tax-deductible contributions, tax-free withdrawals, and a variety of investment choices. Select a reputable financial institution such as RBC, Scotiabank, or Wealthsimple, see if you can qualify, and start contributing to take advantage of the tax savings. For more details, visit Canada.ca or consult a financial advisor. Take control of your home-buying journey today with an FHSA!