The FHSA: Canada's first home savings account
The First Home Savings Account (FHSA) is purpose-built for first-time buyers — it's the rare account that's tax-deductible going in and tax-free coming out. Here's how it works and how the numbers grow.
What makes the FHSA special
The First Home Savings Account (FHSA)combines the two best features of Canada's other registered accounts:
- Tax-deductible going in — like an RRSP, every contribution lowers your taxable income, so you get some of it back as a tax refund.
- Tax-free coming out — like a TFSA, qualifying withdrawals for a first home (including all the growth) are completely tax-free.
It has an annual contribution limit and a lifetime cap, and you must be a first-time buyer to open one. If you never buy, the balance can roll into your RRSP without using RRSP room — so it's rarely wasted.
How the numbers grow
Say you contribute the maximum each year and your investments grow about 5% a year. Here's how the balance builds — your contributions plus the tax-free growth on top:
- Your contributions
- Tax-free growth
So about $40,000 of your own money becomes roughly $46,000 — and you can withdraw all of it tax-free for a first home, having also collected tax refunds along the way.
What it means for your mortgage
Every dollar in the account is a dollar less you borrow. Here's how that roughly $46,000 FHSA changes the mortgage on a $500,000 home, versus buying with just a 5% down payment:
| 5% down | With the FHSA | |
|---|---|---|
| Down payment | $25,000 | $71,000 |
| Mortgage (amount borrowed) | $475,000 | $429,000 |
| Monthly payment | $2,899 | $2,619 |
| Total interest over 25 yrs | $394,808 | $356,574 |
- Total interest paid
Using the account, your monthly payment is about $281 lower and you pay roughly $38,234 less interest over the life of the loan.
Where it fits
For most first-time buyers the FHSA is the first account to fill — the deduction and the tax-free withdrawal are hard to beat. After that, look at the TFSA and the RRSP Home Buyers' Plan. You can use more than one for the same purchase.
When you're ready, see what your deposit translates to on the mortgage calculator.
This page is general educational information to help you think it through — not financial, tax, or legal advice. Your own situation is unique; consider speaking with a qualified adviser before making a big decision. See how we calculate and our Privacy Policy.