Best FHSAs in Canada: Where to get the new first home savings account
The new first home savings account was created to help you save more money for a home purchase. Here’s how to find the best FHSA for your needs.
The new first home savings account was created to help you save more money for a home purchase. Here’s how to find the best FHSA for your needs.
Canadians can now boost their savings for a down payment on a home with a new type of registered account. The first home savings account (FHSA), also referred to as the tax-free first home savings account, creates up to $40,000 in tax-free savings room for first-time home buyers. In this article, we’ll explain why the FHSA was created, how it works and how you can maximize its potential—even if you have no immediate plans to buy a home.
On April 1, Questrade became the first company to launch an FHSA in Canada. Since then, RBC, National Bank of Canada and Fidelity Investments have all launched their accounts, and more institutions are expected to follow suit in the coming months. Among the Big Six banks, BMO, TD, CIBC and Scotiabank are aiming to make their FHSAs available before the end of the year.
If your bank doesn’t have an FHSA yet, it might later this year. Through the passing of legislation, the Canadian government made it possible for Canadians to access FHSAs starting on April 1, 2023. However, most financial institutions were not ready to launch their accounts on that date; many have decided to wait or continue to work with the Canada Revenue Agency (CRA) on obtaining approval to offer the new account type. This has delayed many institutions from giving their customers access to FHSAs.
Yes. When FHSA rules were first proposed, the federal government said it would not allow Canadians to withdraw from both the FHSA and the Home Buyers’ Plan (HBP) to make a qualifying home purchase. However, that rule was amended before the FHSA’s official launch. As of April 1, 2023, Canadians are allowed to use both the FHSA and HBP on the same qualifying home. Read more about the HBP.
Yes. However, unlike with RRSPs, FHSA contributions made during the first 60 days of the calendar year are not deductible on your income tax return for the previous year.
Few institutions currently offer an FHSA; however, the list is expected to grow in the coming months. The MoneySense editorial team will update this page as more accounts become available, so you can easily find the best FHSA for your needs.
On April 1, 2023, Questrade became the first company to offer an FHSA. Customers can invest in the FHSA through a Questrade self-directed account or through Questwealth Portfolios, its robo-advisor platform. You can open a Questrade or Questwealth FHSA for free, and there’s no minimum deposit required; however, in order to open the account, customers must have at least $250 invested with Questrade or $1,000 invested with Questwealth Portfolios.
Good to note: MoneySense named Questwealth Portfolios the best robo-advisor for frugal investors in 2023.
RBC began offering an FHSA through RBC Direct Investing (its online brokerage) and RBC InvestEase (its robo-advisor platform) on April 20, 2023. You can also open the account through RBC online banking, on the bank’s mobile app, or by speaking with a financial advisor at a branch. There’s no minimum balance required to open an FHSA.
With RBC InvestEase—MoneySense’s 2023 pick for the best robo-advisor for investors who like things simple—funds are automatically invested once the account balance reaches $100. Customers are charged an annual management fee of 0.5% on the investment balance, plus applicable sales tax and a management expense ratio on exchange-traded funds (ETFs).
With RBC Direct Investing, there are no FHSA maintenance fees. Customers can currently invest in stocks, options, bonds, ETFs and GICs, and the bank is aiming to add mutual funds to the list in the near future. Account holders are charged $9.95 in commission fees for trading stocks and ETFs.
National Bank of Canada launched its FHSA on April 17, 2023. There’s no minimum deposit or minimum balance required to be open an FHSA with the bank. However, customers are required to make an appointment with a National Bank advisor—a step that is not currently required at Questrade and RBC.
Fidelity Investments began offering an FHSA on April 19, 2023. Investors can hold mutual funds and ETFs in the account, but availability of the account is dependant on third-parties.
“Fidelity currently provides eligible investors access to the FHSA through financial advisors who offer client-name accounts and eligible online trading platforms,” wrote Chris Pepper, vice president of corporate affairs at Fidelity, in an email. “We expect more intermediary financial institutions (dealers, etc.) to offer these products in the coming weeks and months.”
There are likely several reasons for the delayed roll-out of FHSAs at many Canadian financial institutions, including four of the Big Six banks.
Aaron Hector, a Certified Financial Planner and private wealth advisor at Calgary-based CWB Wealth, says one possibility is that many firms are waiting on their application to be approved by the Registered Plans Directorate at the Canada Revenue Agency (CRA). He notes that certain official documents are not yet available, such as the form to make a designated withdrawal or designated transfer, and the form to transfer from an FHSA into a registered retirement savings plan (RRSP) or registered retirement income fund (RRIF).
Another possible explanation, he says, is that providers “might not be ready to offer the FHSA as internally they have not yet had adequate time to get their internal processes ready and train their staff on the new account.”
To pick the right FHSA, you should ask yourself the same questions you would when opening any other account, says Hector. It’s important to consider the FHSA’s investment options and fees, as well as whether you’ll be ‘on your own’ or receive financial advice from the company offering the account.
“The only added quirk right now is that your number one choice simply may not be an option if they are not yet offering it,” Hector says. “Unless you have a home purchase coming up in the near term, you might just want to wait a little bit longer and open it up at your preferred location.”
As more FHSAs become available, consider these factors before opening the account:
Short for first home savings account, the FHSA is a type of registered account designed to help Canadians save to buy their first home, namely the down payment, which can be up to 20% of the total cost of the property. You can contribute up to $8,000 per year into an FHSA, up to a lifetime limit of $40,000.
The FHSA shares similarities with the RRSP and the TFSA, which are also available to Canadians. FHSA contributions are tax-deductible, like with an RRSP, and the money can be withdrawn tax-free, like with a TFSA—as long as the withdrawal is used for a down payment on a home. Funds put into an FHSA grow tax-free and are not subject to capital gains tax.
What is an FHSA? Read the MoneySense Glossary definition.
FHSAs became available on April 1, 2023, through an act of legislation passed in 2022. FHSAs can be issued by banks, credit unions, insurance companies and trust companies. Eventually, you should be able to find them wherever RRSPs and TFSAs are offered.
Read more about the announcement of the FHSA as part of the 2022 federal budget.
To open an FHSA, you must be a Canadian resident aged 18 or older. The FHSA can remain open for 15 years, or until the end of the year you turn 71, or until the end of the year following the year in which you make a qualifying home purchase—whichever comes first.
You can contribute up to $8,000 per year toward your FHSA, up to a lifetime limit of $40,000. Unused contribution room, up to a maximum of $8,000, can be carried forward one year; this means that if you do not contribute anything in one year, you can contribute up to a maximum of $16,000 the following year. Unlike with a TFSA, however, FHSA contribution room only begins to accumulate once you’ve opened the account—it does not automatically begin when you turn 18 or apply retroactively to when you turned 18.
You can open an FHSA if you meet all of these qualifying criteria at the time of opening the account:
To be considered a first-time home buyer when opening an FHSA, you must not have lived in a qualifying home that you owned or jointly owned at any time in the calendar year before the account is opened, or at any time in the preceding four calendar years. And you must not have lived in a qualifying home that your spouse or common-law partner owned or jointly owned, at any time in the calendar year before the account is opened or at any time in the preceding four calendar years.
In Canada, there are limitations on the types of investments you can hold in registered accounts. The federal government has stated that the qualified investments for an FHSA are the same as those for a TFSA. This means you can hold the following assets in an FHSA:
You cannot hold the following investments in your FHSA:
Read more: “What can I hold in an FHSA?”
If you decide not to use money in an FHSA for a home purchase—say, you decide that renting is better for you, you live with someone who already owns their place, or you inherit real estate—you can transfer the funds to an RRSP or a RRIF without being penalized or affecting your RRSP contribution room. In essence, the FHSA creates additional RRSP contribution room, up to $40,000, for all Canadians who meet the definition of a first-time home buyer.
However, keep in mind that an FHSA withdrawal used for a home purchase is not taxed, whereas funds withdrawn from an RRSP or a RRIF are taxed.
When buying your first home, you can use the FHSA with the Home Buyers’ Plan (HBP), which allows you to borrow up to $35,000 from your RRSP. And when buying a home jointly with another person, you can combine your FHSA and HBP withdrawals for a sum of at least $80,000 from your FHSAs and $70,000 through the HBP, for a total of $150,000. That’s equal to a 20% down payment on a home priced at $750,000. This is why the FHSA was created—to make buying a home more accessible for those wanting to get on the real estate ladder (more info below).
These calculations do not account for potential tax-free investment growth in the FHSA, nor any money you may have saved in a TFSA, both of which would boost the total amounts available for a down payment. Note that HBP withdrawals are taxed if not repaid within 15 years.
To get a sense of how your investments might grow in an FHSA, use our compound interest calculator.
Here’s a chart that shows the key differences and similarities between these three accounts.
|Primary purpose is saving for a down payment||Yes||Only with an HBP withdrawal||No|
|Contributions are tax-deductible||Yes||Yes||No|
|Annual contribution limit||$8,000||Based on your personal income, with a maximum of $30,780 in 2023||$6,500 in 2023|
|Annual contribution limit is based on your income||No||Yes||No|
|Unused contribution room carries forward||Yes, but you can carry forward a maximum of $8,000, for a total contribution of $16,000 in a given year||Yes||Yes|
|Lifetime contribution limit (as of 2023)||$40,000||Based on your personal income||$88,000 (for Canadians born in 1991 or earlier)|
|Account withdrawals are taxed||Depends. Not taxed when used for a home purchase.||Yes, unless used for a home purchase through the HBP||No|
Yes. Effective April 1, 2023, the Canada Deposit Insurance Corporation (CDIC) will begin to offer separate coverage of $100,000 for eligible deposits held in an FHSA. Canadians’ deposits are now covered under nine different insured deposit categories at CDIC member institutions. Note, however, that while the CDIC covers GICs, it does not cover other types of investments.
Many Canadians dream of home ownership. However, many factors have long made it a difficult goal to achieve, and that continues to be the case in 2023. These factors include high real estate prices, which require saving a substantial down payment and having a high income to qualify for a mortgage, as well as high rents, which make saving more difficult. (See how much income you need to afford a home in the Greater Toronto and Vancouver areas.)
As such, with the goal of helping more people buy their first home, the federal government announced in 2022 its plans to launch the FHSA in 2023. It also doubled the first-time home buyers’ tax credit from $5,000 to $10,000 and extended the First-Time Home Buyer Incentive to March 31, 2025, among other measures aimed at supporting home buyers.
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If I already own my condo, can I still put the 40k(over 5 years) into a FHSA and then just roll that into an rrsp. Note i am 64 years old. I have one condo in my name and one in both mine and my wifes name. Both retired, just trying to put tax free money awat and out tfsa are full?
Does FHSA have age limit?
Do I qualify as a Canadian resident for the FHSA if I am a Canadian Citizen who lives outside Canada because I am employed in the Canadian Federal Public Service as a diplomat or am posted overseas as a member of the Canadian Forces?