What happens to the money in an FHSA if you don’t buy a home?
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However, keep in mind that an FHSA withdrawal used for a home purchase is not taxed, whereas funds withdrawn from an RRSP or a RRIF are taxed.
Using an FHSA with other accounts and home-buying programs
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.
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FHSAs: How they compare to RRSPs and TFSAs
Here’s a chart that shows the key differences and similarities between these three accounts.
| FHSA | RRSP | TFSA | |
|---|---|---|---|
| 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 | $7,000 in 2024 |
| 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 | $95,000 (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 |
Are FHSA deposits insured?
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.
Why was the FHSA created?
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 heading into 2024. 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.)
