Unsure about buying a home? Why you should open an FHSA now anyway

Buying a home in Canada hasn’t been easy in recent years, but thanks to recent changes to mortgage rules, falling interest rates and more cuts expected in the months ahead, many prospective home owners are feeling freshly optimistic. It all starts with a down payment, though—and the bigger, the better. If you’re thinking about buying your first home in the next few years, consider opening a first home savings account (FHSA) by December 31. Even if you don’t plan to start contributing this year, opening the account now gives you more room to save in 2025.  

Here’s what you need to know about using this account, including the FHSA contribution limit and deadline, how to open an FHSA account online and why it might even make sense to open one if you’re undecided about home ownership and debating your decision.

What is a first home savings account (FHSA)?

The FHSA is a tax-free registered savings account that was introduced in April 2023. Designed to help first-time buyers save up for a down payment and get into the housing market sooner, the FHSA allows account holders to contribute up to $8,000 per year, up to a lifetime FHSA limit of $40,000 (or twice that amount if you’re part of a couple and you’re both first-time home buyers). Depending on where you open your FHSA, you may grow your money faster. For example, EQ Bank’s FHSA Savings Account offers 2.75% interest as well as a limited-time bonus offer (more on that below).

Other registered accounts offer tax-free deposits or withdrawals—not both—but the FHSA is completely tax-free as long as the funds are eventually used to purchase your first home. This allows for tax sheltering on both contributions and withdrawals, including any income earned from interest, dividends or capital gains. An FHSA can hold a wide range of qualifying investments, including guaranteed investment certificates (GICs), exchange-traded funds (ETFs) and more.

What is the FHSA contribution limit?

One key detail to know about the FHSA is that contribution room is created only once you open an account. That’s different than, say, a tax-free savings account (TFSA), whose contribution room is based on the account holder’s age. Knowing this, it makes sense to open an FHSA sooner rather than later to get the most out of it, even if you can’t contribute much (or anything) right away.

For example, if you open an FHSA by December 31, 2024, you’ll get $8,000 in contribution room for 2024 on the date you open the account, plus $8,000 more room for 2025 on January 1, for a total of $16,000 in contribution room.

Plus, certain FHSAs offer interest on your savings. EQ Bank’s FHSA Savings Account pays 2.75% interest, plus, for a limited time, you can earn a 1% match on new deposits and transfers made between Nov. 1, 2024, and Feb. 28, 2025. You can open an EQ Bank FHSA online in minutes. (The EQ Bank FHSA is not available in Quebec.) Also, there’s no minimum deposit when you open an FHSA with EQ Bank. You also have the option to buy EQ Bank’s FHSA GICs (the minimum term is three months).

Why opening an FHSA makes sense even if you’re undecided about home ownership

The FHSA nicely complements a few other home-buying tools for first-timers. You also have access to the Home Buyers’ Plan (HBP), which allows individual investors to borrow up to $60,000 from their registered retirement savings plan (RRSP), without penalty or tax payments, to put a down payment on a home. (Until recently, the amount you could borrow was $35,000 per person—the limit was increased in 2024.)

That’s not all. Upcoming regulatory changes aim to make mortgages more accessible. By Dec. 15, 2024, the price cap for homes that are eligible for an insured mortgage will increase from $1 million to $1.5 million. In addition, first-time home buyers will be able to get a 30-year mortgage amortization on any type of home (not just new builds). This will result in lower monthly carrying costs, which directly improves the affordability of a given property.

Between these new mortgage rules and government programs, plus an existing tax credit for first-time home buyers, putting in an offer may be more attainable than ever.

An FHSA can stay open for up to 15 years. What if you ultimately decide not to buy a home? You can transfer the contents of your FHSA directly into an RRSP or a RRIF (registered retirement income fund) without any immediate tax consequences or loss of unused RRSP deduction room. If you withdraw the funds from your FHSA instead, they must be included as income at tax time.

The FHSA deadline is almost here

Remember, to get your first $8,000 of FHSA contribution room and effectively double your limit for 2025, you’ll need to open an account by Dec. 31.

Earning interest on your savings can make a big impact over time, so don’t just park your money in a regular savings account. By paying 2.75% interest on your savings, EQ Bank’s FHSA will help you reach your goals faster. Opening one before the end of the year will help you maximize this important savings opportunity and set yourself up for success in 2025.

Interest on the EQ Bank FHSA is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.

More about savings:

How changes to the Home Buyers’ Plan could affect your down payment An alternative to GICs: This new bank account pays high interest on your cash holdings How to save money in Canada: A new way that offers higher interest and more flexibility Should you get that promo rate? Check out the fine print first

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