The First Home Savings Account was introduced in April 2023 as a tax haven to help make home-buying more affordable for a new generation of Canadians. Find out everything you need to know about the new first-time home buyers account, including how to invest and the best stocks to buy in your FHSA.
Key Highlights
- The First Home Savings Account helps Canadians save money towards buying their first home
- To open an FHSA, Canadians must first time home buyers age 18 years or older
- First-Year FHSA Contribution Limit = $8,000
- Lifetime FHSA Contribution Limit = $40,000
- Best FHSA Stocks: Shopify, Royal Bank of Canada, & Barrick Gold
Can You Buy Stocks In An FHSA in Canada?
An FHSA can be used for more than just holding your hard-earned cash.
Like an RRSP or a TFSA, an FHSA allows investors to buy and sell the best Canadian stocks. An FHSA can hold stocks, mutual funds, bonds, GICs, and other assets, as long as the total contribution remains under the $40,000 lifetime limit.
This allows Canadians to take advantage of the many benefits provided by owning a First Home Savings Account, including tax savings, tax-free growth, and additional withdrawal flexibility.
How To Buy The Best Canadian FHSA Stocks
Today, the best investing apps allow members to buy Canadian stocks in their FHSA with the click of a button.
Setting up a First Home Savings Account is quick and simple.
At Questrade, members can invest in the top ETFs for free and benefit from low commission fees while trading stocks in their FHSA. To help minimize fees even more, Questrade is giving away a free $50 trade commission rebate to new members that sign up for an account.
In just four easy steps, Canadians can receive free cash to invest in their FHSA.
Check out our step-by-step guide on how to buy the best Canadian stocks in your FHSA.
- Click here to sign up for an FHSA account at Questrade
- Fill out the required documents with accurate personal information
- Add funds to your Questrade account
- Receive a $50 trade commission rebate to invest in the best FHSA stocks
Ranking The Best FHSA Stocks To Buy Right Now In Canada
The best stocks for your FHSA might be different for each investor and will depend on a few different factors.
Ultimately, the best FHSA stocks should align with your investment goals, risk tolerance, and time horizon.
When saving for the purchase of their first home, it’s important to focus on stocks with long-term growth potential while managing risk responsibly along the way.
Below, we’ll go over the best FHSA stocks that deserve careful consideration from investors saving for their first home.
- Shopify (SHOP.TO)
- Barrick Gold (ABX.TO)
- Royal Bank of Canada (RY.TO)
- Fortis (FTS.TO)
- National Bank of Canada (NA.TO)
- Bank of Nova Scotia (BNS.TO)
- Bank of Montreal (BMO.TO)
- Canadian Imperial Bank of Commerce (CM.TO)
- Canadian Natural Resources (CNQ.TO)
- TD Bank (TD.TO)
Reviewing The Best FHSA Stocks In 2024
Investing can be a valuable tool for Canadians on their journey toward financial freedom.
By investing their money in an FHSA, Canadians have the opportunity to grow their wealth faster and achieve their dream of buying their first home.
Below, we’ve ranked and reviewed the best Canadian stocks to buy in your FHSA in 2024.
1. Shopify (SHOP.TO) — Best Canadian FHSA Stock For Future Growth
- Rating: ⭐⭐⭐⭐⭐
- 52 Week Range: 33.00 – 93.83
- Avg. Volume: 3,611,785
- Market Cap: 116.487B
- PE Ratio (TTM): N/A
- EPS (TTM): -2.21
- Earnings Date: Aug 2, 2024
- Forward Dividend & Yield: N/A
- Ex-Dividend Date: N/A
Shopify is a company that helps people and businesses create and manage online stores. It operates in the e-commerce market, which is all about buying and selling things online.
With the e-commerce market growing rapidly, Shopify has become a popular choice for entrepreneurs that are looking for an easy-to-use platform that can handle a large number of online stores.
Shopify’s subscription-based pricing model and an expanding merchant base have contributed to its consistent revenue increase. Moreover, the company has diversified its revenue streams by offering value-added services like payments, capital, and more, further enhancing its growth potential.
Patient investors are being rewarded for buying and holding Shopify stock, which is up 85.58 percent year-to-date in 2023.
The recent upward momentum in Shopify’s stock price indicates a shift in market sentiment, putting the company on the verge of a long-term breakout.
When saving up for a home, investors want to put their money into a company that has the potential for future growth.
One of the best Canadian tech stocks, Shopify has established itself among the market leaders of the future, and as a result, lands as the No. 1 on our list of stocks to buy in your FHSA account.
2. Barrick Gold (ABX.TO) — Cheapest Canadian Blue-Chip Stock In 2024
- Rating: ⭐⭐⭐⭐⭐
- 52 Week Range: 22.94 – 23.28
- Avg. Volume: 3,252,534
- Market Cap: 40.287B
- PE Ratio (TTM): 286.88
- EPS (TTM): 0.08
- Earnings Date: Aug 08, 2024
- Forward Dividend & Yield: 0.53 (2.21%)
- Ex-Dividend Date: May 30, 2024
Barrick Gold, a leading gold mining company, presents a potential turnaround opportunity for Canadians.
Despite being down 3.77% Year-to-Date (YTD) in 2023, the stock has recently shown resilience by bouncing off key support areas. This indicates a potential reversal in its recent downward trend and a buying opportunity for prudent Canadian investors.
Gold is often considered a safe-haven asset and has historically been sought after in times of uncertainty. Barrick Gold is one of the largest gold producers globally and stands to benefit from the potential increase in gold prices.
Economic volatility, inflation concerns, or geopolitical tensions can drive demand for gold, boosting Barrick Gold’s prospects.
The recent bounce off key support areas suggests that the stock may have found a bottom, creating a favorable risk-reward ratio for investors. Barrick Gold stock also pays a dividend, making it an attractive FHSA stock to buy and hold for the foreseeable future.
Barrick Gold’s strong track record and industry expertise add credibility to its potential for recovery. The company has a diverse portfolio of mining assets and a disciplined approach to cost management.
While past performance does not guarantee future results, Barrick Gold’s ability to navigate through challenging market conditions in the past suggests its resilience and potential for long-term success.
3. Royal Bank of Canada (RY.TO) — FHSA Stock with a History of Dividend Payments & Potential Growth
- Rating: ⭐⭐⭐⭐⭐
- 52 Week Range: 116.75 – 140.18
- Avg. Volume: 4,038,696
- Market Cap: 178.052B
- PE Ratio (TTM): 12.66
- EPS (TTM): 10.12
- Earnings Date: Aug 24, 2024
- Forward Dividend & Yield: 5.40 (4.21%)
- Ex-Dividend Date: Jul 25, 2024
Royal Bank of Canada is one of the best Canadian bank stocks to buy and hold in your FHSA account.
Despite being down 0.23 percent year-to-date in 2023, Royal Bank stock is displaying signs of strength following a rebound from key support areas.
As one of Canada’s largest banks, RBC benefits from its strong market position and diversified business segments. The Canadian bank provides a wide range of financial services, including personal banking, commercial banking, wealth management, and capital markets operations.
RBC’s broad offering and established reputation position it well to capitalize on the Canadian economy’s growth.
Overall, RBC’s resilience and strong financial performance contribute to its investment appeal. Over the last five years, RBC investors are up 26.25 percent and the company has increased dividends by an average of 8.09 percent per year during that span.
Royal Bank has a robust balance sheet, solid credit quality, and a disciplined approach to risk management. Additionally, RBC’s commitment to technological innovation and digital transformation further enhances its competitive advantage in an evolving financial landscape.
4. Fortis (FTS.TO) — Stable FHSA Stock That Pays Rising Dividends
- Rating: ⭐⭐⭐⭐⭐
- 52 Week Range: 48.45 – 62.00
- Avg. Volume: 1,617,273
- Market Cap: 27.781B
- PE Ratio (TTM): 19.50
- EPS (TTM): 2.94
- Earnings Date: Aug 2, 2024
- Forward Dividend & Yield: 2.26 (3.98%)
- Ex-Dividend Date: May 16, 2024
Fortis, a leading North American utility company, presents an attractive investment opportunity for investors seeking stability and dividends.
With the stock up 5.02 percent year-to-date in 2023, Fortis is displaying signs of strength.
Trading just 8 percent off its all-time highs, Fortis’ recent performance suggests a positive trajectory. Additionally, the current dividend yield of 3.98 percent offers an enticing income stream for FHSA investors that are saving up to buy their first home.
Fortis operates as a regulated utility, providing essential services such as electricity and natural gas distribution to millions of customers. The company’s stable and predictable business model, backed by long-term contracts and regulated rates, offers a defensive investment option, especially during uncertain economic conditions.
Fortis’ consistent dividend payments also make it an attractive choice for income-oriented investors. With a dividend yield of 3.98 percent, the company provides a steady stream of income that can help investors save up for their first home purchase.
5. National Bank of Canada (NA.TO) — Top Canadian Bank Stock To Buy and Hold For 5 Years
- Rating: ⭐⭐⭐⭐⭐
- 52 Week Range: 82.16 – 104.83
- Avg. Volume: 1,555,365
- Market Cap: 33.719B
- PE Ratio (TTM): 10.72
- EPS (TTM): 9.31
- Earnings Date: Aug 30, 2024
- Forward Dividend & Yield: 4.08 (4.09%)
- Ex-Dividend Date: June 23, 2024
While most Canadian bank stocks have struggled to gain traction, National Bank of Canada has emerged as a shining star, delivering an impressive 8.69 percent year-to-date return in 2023.
This relative strength within the banking sector, which has lagged behind the rest of the market, presents an intriguing opportunity for FHSA investors.
National Bank of Canada, one of the best Canadian dividend stocks, benefits from its diversified business segments and strong presence in Quebec. The bank provides a comprehensive range of financial services, including personal and commercial banking, wealth management, and investment banking.
Despite its strong YTD performance, Canadians can still consider National Bank as an undervalued opportunity within the banking sector.
Trading just 5.04 percent off its all-time highs, National Bank stock’s dividends per share growth rate has reached 8.56 percent over the last five years. During that same timeframe, patient investors are up a whopping 58.26 percent.
While the broader banking sector has faced challenges, National Bank has flashed relative strength and even managed to outperform expectations, indicating its resilience and potential for continued growth.
Despite its impressive performance, the stock still offers potential upside.
National Bank’s commitment to innovation and digital transformation positions it well to adapt to evolving customer needs and industry trends. The bank’s strategic investments in technology and focus on enhancing its digital platforms ensure it remains competitive in a rapidly changing financial landscape.
6. Bank of Nova Scotia (BNS.TO) — Great FHSA Stock For Dividend Investors
- Rating: ⭐⭐⭐⭐
- 52 Week Range: 63.05 – 81.98
- Avg. Volume:3,661,371
- Market Cap: 78.264B
- PE Ratio (TTM): 9.66
- EPS (TTM): 6.76
- Earnings Date: Aug 23, 2024
- Forward Dividend & Yield: 4.24 (6.49%)
- Ex-Dividend Date: Jul 04, 2024
One of the highest dividend stocks in Canada, Bank of Nova Scotia, also known as Scotiabank, presents an intriguing investment opportunity for Canadians.
Despite being down 1.03 percent year-to-date in 2023, the stock is displaying signs of strength after rebounding from key support areas around $63. This rebound indicates a potential reversal in its downward trend and highlights a value opportunity for FHSA investors, who can benefit from a dividend yield of 6.49 percent.
One of Canada’s leading financial institutions, Scotiabank has a strong market presence and a global footprint. Scotiabank benefits from its extensive customer base and well-established brand reputation, allowing it capitalize on a diversified range of financial services, including personal banking, commercial banking, and wealth management
The recent rebound from key support areas around $63 suggests that the stock has found solid ground and is poised for potential growth.
Overall, Scotiabank’s long-standing track record of paying dividends and delivering shareholder value makes it an appealing choice for Canadians saving to buy their first home.
7. Bank of Montreal (BMO.TO) — Canadian Bank Stock With History of Dividend Payments
- Rating: ⭐⭐⭐⭐
- 52 Week Range: 111.88 – 137.64
- Avg. Volume: 2,229,574
- Market Cap: 86.54B
- PE Ratio (TTM): 12.09
- EPS (TTM): 10.04
- Earnings Date: Aug 29, 2024
- Forward Dividend & Yield: 5.88 (4.89%)
- Ex-Dividend Date: Jul 27, 2024
Bank of Montreal, commonly known as BMO, is another potential investment opportunity to consider in your FHSA account.
When saving up for their first home, Canadians aren’t advised to take on too much risk in their FHSA, making companies like BMO among the best stocks to buy in Canada.
Despite being down 2.14 percent year-to-date in 2023, the stock is displaying signs of strength after bouncing off of key support around $112.
Currently trading at $121.37, BMO has the potential to challenge and surpass its all-time highs achieved during the COVID-19 pandemic.
With a diverse portfolio of financial services, including personal banking, commercial banking, wealth management, and investment banking, BMO benefits from its broad customer base and a long history of stability.
That stability includes 29 years of paying dividends, which have grown by an average rate of 10.11 percent per share over the last 10 years.
As the economy recovers from the impacts of the pandemic, BMO stands to benefit from increased economic activity and improving market conditions.
8. Canadian Imperial Bank of Commerce (CM.TO) — One of the Highest FHSA Dividend Stocks in Canada
- Rating: ⭐⭐⭐⭐
- 52 Week Range: 53.58 – 68.74
- Avg. Volume: 3,075,355
- Market Cap: 51.017B
- PE Ratio (TTM): 10.92
- EPS (TTM): 5.19
- Earnings Date: Aug 28, 2024
- Forward Dividend & Yield: 3.48 (6.14%)
- Ex-Dividend Date: Jul 27, 2024
The Canadian Imperial Bank of Commerce, better known as CIBC Bank, is one of the best Canadian stocks to buy in your FHSA.
Unlike other stocks in the Canadian banking sector that have struggled to keep pace with the market, CIBC’s stock has shown relative strength with a 2.61 percent year-to-date increase in 2023.
As one of Canada’s biggest banks, CIBC offers a range of banking and financial services for both individuals and businesses. They have a solid reputation, a large customer base, and expertise in various sectors, which sets them apart.
Not only does CIBC have room to grow, but the company also has a history of paying growing dividends. The company has paid dividends for over 29 years.
Over the last 10 years, CIBC investors are up more than 36 percent on their position while enjoying a dividend per share growth rate of 9.4 percent.
For Canadians looking to save up for their first home purchase, this could be an ideal time to consider getting in on the action. CIBC stock has been on the rise, and recently it bounced back after touching its 50-day moving average, a sign that it could be preparing for a move to the upside.
9. Canadian Natural Resources (CNQ.TO) — Top Canadian Mining Stock To Buy In 2024
- Rating: ⭐⭐⭐
- 52 Week Range: 61.23 – 84.25
- Avg. Volume: 5,786,434
- Market Cap: 81.724B
- PE Ratio (TTM): 8.80
- EPS (TTM): 8.51
- Earnings Date: Aug 03, 2024
- Forward Dividend & Yield: 3.60 (4.73%)
- Ex-Dividend Date: June 15, 2024
Canadian Natural Resources operates in the energy sector, with a focus on oil and natural gas exploration, production, and development.
Over the past five years, Canadian Natural Resources investors are up 65.21 percent and have enjoyed an impressive dividend per share growth rate of 18.44 percent during that span.
While the stock has only shown a modest increase of 0.36 percent year-to-date in 2023, it has maintained its gains from early 2022, indicating stability in a challenging market.
As one of the top energy stocks in Canada, Canadian Natural Resources stands to benefit from a recovery in oil and natural gas prices and increased demand for energy resources.
As the global economy rebounds and energy consumption rises, the company’s strong asset base and operational efficiency can position it for further growth.
10. TD Bank (TD.TO) — Well-Known Canadian Bank Stock Poised For A Rebound
- Rating: ⭐⭐⭐
- 52 Week Range: 76.32 – 94.05
- Avg. Volume: 6,382,769
- Market Cap: 154.307B
- PE Ratio (TTM): 10.59
- EPS (TTM): 7.92
- Earnings Date: Aug 24, 2024
- Forward Dividend & Yield: 3.84 (4.71%)
- Ex-Dividend Date: Jul 07, 2024
TD Bank, one of the largest Canadian banks, rounds out our list of the 10 best stocks to buy in your FHSA in 2024.
TD Bank’s prominence in the banking industry, combined with its diversified range of financial services, positions it well for long-term success.
Despite experiencing a significant year-to-date decline of 5.41 percent in 2023, TD Bank stock is currently holding critical support at around $82. This level of support indicates a potential bottom and offers an attractive entry point for bargain-hunting investors.
The stock’s significant YTD decline, while concerning, also presents an opportunity for investors to enter at a lower price point.
As the economy improves and market conditions stabilize, TD Bank’s strong fundamentals and market position make it a compelling investment choice for Canadians saving up to buy their first home.
Comparing The Top-10 Canadian FHSA Stocks
| Rank | Stock (Ticker) | Rating | 52 Week Range | Avg. Volume | Market Cap | Forward Dividend & Yield |
|---|---|---|---|---|---|---|
| 1 | Shopify (SHOP.TO) | ⭐⭐⭐⭐⭐ | 33.00 – 93.83 | 3,611,785 | 116.487B | N/A |
| 2 | Barrick Gold (ABX.TO) | ⭐⭐⭐⭐⭐ | 22.94 – 23.28 | 3,252,534 | 40.287B | 0.53 (2.21%) |
| 3 | Royal Bank of Canada (RY.TO) | ⭐⭐⭐⭐⭐ | 116.75 – 140.18 | 4,038,696 | 178.052B | 5.40 (4.21%) |
| 4 | Fortis (FTS.TO) | ⭐⭐⭐⭐⭐ | 48.45 – 62.00 | 1,617,273 | 27.781B | 2.26 (3.98%) |
| 5 | National Bank of Canada (NA.TO) | ⭐⭐⭐⭐⭐ | 82.16 – 104.83 | 1,555,365 | 33.719B | 4.08 (4.09%) |
| 6 | Bank of Nova Scotia (BNS.TO) | ⭐⭐⭐⭐ | 63.05 – 81.98 | 3,661,371 | 78.264B | 4.24 (6.49%) |
| 7 | Bank of Montreal (BMO.TO) | ⭐⭐⭐⭐ | 111.88 – 137.64 | 2,229,574 | 86.54B | 5.88 (4.89%) |
| 8 | Canadian Imperial Bank of Commerce (CM.TO) | ⭐⭐⭐⭐ | 53.58 – 68.74 | 3,075,355 | 51.017B | 3.48 (6.14%) |
| 9 | Canadian Natural Resources (CNQ.TO) | ⭐⭐⭐ | 61.23 – 84.25 | 5,786,434 | 81.724B | 3.60 (4.73%) |
| 10 | TD Bank (TD.TO) | ⭐⭐⭐ | 76.32 – 94.05 | 6,382,769 | 154.307B | 3.84 (4.71%) |
What Is A First Home Savings Account?
A First-Time Home Buyer’s Savings Account, also known as an FHSA account, is a special savings account created to help people save money for their first home.
It’s a program regulated by the government that provides benefits to make it easier for individuals to become homeowners.
How Does An FHSA Work?
When you put money into your FHSA account, you may be able to deduct that amount from your taxable income, which means you could pay less in taxes.
The money that you save in the account can also grow without being taxed.
When you’re ready to buy your first home, you can use the funds from your FHSA account to cover certain expenses, like the down payment or closing costs.
Overall, an FHSA account is a helpful tool designed to support you in saving for and purchasing your first home.
Note: Rules for FHSA accounts differ depending on where you live, so it’s important to check the specific guidelines in your area.
Types of First Home Savings Accounts
There are a few different types of First Home Savings Accounts available to Canadians.
Residents can open a depositary FHSA, trusteed FHSA, an insured FHSA, or a self-directed FHSA.
Different financial institutions like banks, insurance companies, credit unions, and trust companies can offer these types of FHSA accounts. Canadians can also open an FHSA with one of the top investing apps, like Questrade and Wealthsimple.
Let’s dig deeper into the different types of accounts for first-time homebuyers.
Depositary FHSA
A depositary FHSA is an account offered by a financial institution where you can deposit your money. It can also hold term deposits or guaranteed investment certificates (GICs), which are like savings accounts that pay you interest.
Trusteed FHSA
A trusteed FHSA is a trust account managed by a trust company. It can hold various types of investments, including money, term deposits, GICs, government and corporate bonds, mutual funds, and stocks listed on a designated stock exchange.
Insured FHSA
An Insured FHSA an annuity contract with a licensed annuity provider. An annuity is a type of investment that provides a regular income stream over a set period of time.
Self-Directed FHSA
If you prefer to have more control over your investments and want to choose and manage your own investment portfolio, a self-directed FHSA might be right for you.
Unlike other managed accounts, this type of FHSA account allows you to make your own decisions when buying and selling qualified investments.
What Makes An FHSA Account Different From An RRSP or TFSA?
| FHSA | RRSP | TFSA | |
|---|---|---|---|
| Purpose | Save for first home purchase | Save for retirement | Flexible savings for various goals |
| Tax Deductibility | Contributions are often tax-deductible | Contributions are often tax-deductible | Contributions are not tax-deductible |
| Tax-Free Growth | Yes, tax-free growth | Yes, tax-deferred growth | Yes, tax-free growth |
| Tax-Free Withdrawals | No, specific withdrawals for home purchase | No, taxes upon withdrawal | Yes, tax-free withdrawals |
| Withdrawal Restrictions | Qualifying home purchase | Taxes and potential penalties before retirement | No restrictions, flexible withdrawals |
| Contribution Limits | Specific limits based on regional regulations | Income-based and annual limits | Annual limits set by the government |
| Investment Options | Wide range of investment options | Wide range of investment options | Wide range of investment options |
Purpose
The primary purpose of an FHSA is to save for the purchase of a first home. In contrast, RRSPs are designed for retirement savings, while TFSAs offer more flexibility for various savings goals, including retirement, education, or general investments.
Tax Deductibility
Contributions made to an RRSP are generally tax-deductible, meaning they can be deducted from your taxable income, potentially reducing your tax liability. Similarly, FHSA contributions are tax-deductible.
Tax-Free Growth and Withdrawals
Both TFSAs and RRSPs offer tax advantages but in different ways. TFSAs allow your investments to grow tax-free, and withdrawals are tax-free as well. Like TFSAs, the FHSA also allows for tax-free growth and withdrawals.
In contrast, RRSPs provide tax-deferred growth, meaning you’ll pay taxes when you withdraw the funds in retirement.
Withdrawal Restrictions
TFSAs offer full flexibility for withdrawals, allowing you to access your funds at any time for any purpose without tax consequences.
RRSPs, on the other hand, generally impose taxes and potential penalties for withdrawals made before retirement.
FHSA withdrawals are specifically designed for qualifying home purchases and may be subject to certain restrictions and eligibility requirements.
Contribution Limits
RRSPs have contribution limits based on your income and annual limits set by the government. TFSAs also have annual contribution limits set by the government.
Meanwhile, FHSA accounts may have their own specific contribution limits determined by regional regulations.
Investment Options
Like TFSAs and RRSPs, FHSAs offer a wide range of investment options, including stocks, bonds, mutual funds, guaranteed investment certificates (GICs) and more.
That means investors can buy the best Canadian stocks and can grow their wealth tax-free while saving up for a new home.
While the lifetime contribution limit is set at $40,000, Canadians can save and withdraw more than that amount by buying and selling stocks and other investments in their FHSA.
Who Can Open An FHSA in Canada?
In order to qualify for opening an FHSA, you need to meet the following criteria:
- You must be a resident of Canada
- You must be 18 years of age or older
- You must be a first-time home buyer
Being classified as a first-time home buyer means that either prior to opening the account or within the last four years, you have not resided in a qualifying home.
How To Open An FHSA Account
Opening an FHSA account is simple.
Qualifying Canadians can register for an FHSA account, add funds, and start investing within a few minutes.
Check out our step-by-step guide on how to sign up for an FHSA account.
Step 1: Choose an FHSA Issuer
First, select a bank, credit union, trust, or insurance company that offers FHSA accounts.
We recommend Questrade, which offers an excellent, easy-to-use platform with low commission fees on a number of different types of investments.
Click here to sign up for an FHSA at Questrade and get a free $50 trade commission rebate.
Step 2: Provide Required Information
When signing up for an FHSA account at Questrade or another financial institution, Canadians will be required to provide some personal information.
Add your social insurance number, date of birth, and any supporting documents needed to verify your eligibility as a qualifying individual.
Step 3: Complete Application Forms
Fill out the application forms provided by Questrade or your FHSA issuer. These forms will ask for your personal information, contact details, and any other relevant information needed to open the account.
Step 4: Review and Sign the Agreement
Carefully review the terms and conditions of the FHSA account agreement provided by the issuer. Ensure that you understand the rules, fees, and any other important details before signing the agreement.
Step 5: Make an Initial Deposit
In order to activate your account, many FHSA issuers, like Questrade, will require an initial deposit to open the FHSA. At Questrade, the minimum deposit is $1,000.
Check with the issuer about their specific deposit requirements and arrange to make the initial contribution if necessary.
Investing In Your FHSA
When saving up to buy their first home, it’s important to make wise financial decisions.
Investing in your FHSA can be a smart financial move for aspiring homeowners.
By contributing to your FHSA, you can save specifically for the purchase or construction of your first home, taking advantage of potential tax benefits and building towards your homeownership goals.
Let’s go over the different types of investments that can be held in your FHSA.
What Types of Investments Can An FHSA Hold?
A First-Time Home Buyer’s Savings Account offers you the flexibility to buy and hold various investments, just like a TFSA or RRSP. You can choose to put your money in things like cash, mutual funds, stocks, bonds, or guaranteed investment certificates (GICs).
Let’s take a deeper dive into the different types of investments available in your FHSA account.
Cash
When you add funds to your FHSA account, your money is turned into a cash balance.
This refers to holding money in the account in the form of cash or cash equivalents.
Mutual Funds
Mutual funds or ETFs are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other assets.
Stocks
Stocks are shares of ownership issued by companies that are traded on public stock exchanges, like the TSX, NASDAQ, and New York Stock Exchange.
Your FHSA can hold anything from blue-chip stocks to dividend stocks and even the best Canadian penny stocks.
Bonds
These are debt instruments issued by governments or corporations to raise capital. By investing in bonds, you are essentially lending money to the issuer in exchange for periodic interest payments and the return of the principal amount.
Guaranteed Investment Certificates (GICs)
These are fixed-term deposits offered by financial institutions that guarantee a fixed rate of return over a specified period of time.
How Long Can You Keep An FHSA Open?
When it comes to how long you can keep an FHSA account open, there are a few things to consider.
Generally, it can stay open for a maximum of 15 years or until the end of the year you turn 71, whichever happens first.
However, if you make a qualifying withdrawal from your FHSA to buy your first home, the account might close at the end of the following year instead.
So, it’s essential to be aware of these timelines to understand how long you can maintain your FHSA and enjoy its benefits.
What Are The Advantages Of An FHSA Account?
An FHSA offers several advantages that can help individuals in their journey toward homeownership. Not only can Canadians save money on taxes by opening an FHSA, but they can also benefit from tax-free growth, withdrawal flexibility, and other additional benefits while saving for their first home.
Here are some key benefits of having an FHSA account:
Tax Benefits
One of the primary advantages of an FHSA is the tax benefits it provides. Contributions made to the account are typically tax-deductible, meaning you can lower your taxable income and potentially reduce the amount of taxes you owe. This tax deduction can provide immediate financial relief and allow you to save more for your first home.
Tax-Free Growth
The funds held within an FHSA account can grow tax-free. Any interest, dividends, or capital gains earned on your contributions are not subject to taxation. This allows your savings to potentially accumulate more quickly over time, helping you reach your homeownership goals faster.
Withdrawal Flexibility
When you’re ready to buy your first home, you can withdraw funds from your FHSA account for the purpose of purchasing a qualifying home. The significant advantage here is that these withdrawals, including any income or gains earned within the account, are typically tax-free. This means you can use the full amount saved, without any tax consequences, towards your home purchase.
Saving Incentive
An FHSA account serves as a dedicated savings tool specifically tailored for first-time home buyers.
Having a separate account focused on homeownership encourages first-time buyers to save money and spend wisely in order to stay on track toward their financial goals.
Potential Additional Benefits
Depending on your jurisdiction and the specific regulations in place, there may be additional benefits associated with FHSA accounts. These can include government incentives, grants, or matching contributions that further enhance your savings potential.
What Are The Disadvantages Of An FHSA Account?
While an FHSA (First-Time Home Buyer’s Savings Account) offers various advantages, there are also some potential disadvantages to consider.
Here are a few drawbacks associated with FHSA accounts:
Limited Purpose
An FHSA account is designed specifically for saving towards the purchase of a first home. This means that the funds saved in the account can only be used for this purpose. If you have other financial goals or unexpected expenses, you may face limitations on accessing or utilizing the funds in your FHSA account for those purposes.
Contribution Limits
Like other tax-advantaged accounts, FHSA accounts often have annual contribution limits imposed by the government. These limits can restrict the amount of money you can contribute to the account in a given year. If you exceed these limits, you may face penalties or lose the tax benefits associated with the excess contributions.
Eligibility Criteria
FHSA accounts typically come with eligibility requirements, such as being a first-time home buyer or meeting residency criteria. These restrictions may exclude certain individuals from opening or contributing to an FHSA account, limiting its availability and benefits.
Regional Variations
The specific rules and regulations governing FHSA accounts can vary from one jurisdiction to another. This means that the benefits and limitations of an FHSA account may differ depending on where you live. It’s essential to understand the specific regulations in your region to assess whether an FHSA account aligns with your financial goals.
Potential Changes in Legislation
As with any government-regulated program, there is always a possibility of legislative changes that could impact the rules and benefits associated with FHSA accounts. It’s important to stay informed about any updates or amendments to the legislation that may affect your FHSA account.
Comparing The Pros and Cons of Opening an FHSA Account
| Advantages | Disadvantages |
|---|---|
| ✅ Tax Benefits | ❌ Limited Purpose |
| ✅ Tax-Free Growth | ❌ Contribution Limits |
| ✅ Withdrawal Flexibility | ❌ Eligibility Criteria |
| ✅ Saving Incentive | ❌ Regional Variations |
| ✅Potential Additional Benefits | ❌ Potential Changes in Legislation |
How To Close A First Home Savings Account
In most cases, closing a FHSA account is quick and easy.
Canadians can withdraw their funds and close their account once they’ve filled out and provided any necessary documentation to the financial institution where the account is held.
Here is a guide to closing your FHSA account in five easy steps.
Step 1: Contact Your Financial Institution
Get in touch with the financial institution where your FHSA is held. You can reach out to them via phone, visit a branch in person, or check their website for specific instructions on closing an FHSA account.
Step 2: Provide Necessary Documentation
Prepare any required documents, such as identification proof and FHSA account details, as requested by the financial institution.
Step 3: Fill Out Closure Request Form
Many financial institutions have a specific closure request form that needs to be completed. Fill out the form accurately, providing all the required information.
Step 4: Withdraw or Transfer Funds
Decide whether you want to withdraw the funds from your FHSA or transfer them to another account. Follow the instructions provided by the financial institution for the chosen option.
Step 5: Confirm Account Closure
After completing the necessary steps, ensure that you receive confirmation from the financial institution that your FHSA account has been successfully closed. It is advisable to keep this confirmation for your records.
Withdrawing From Your FHSA Account
Withdrawing from your First Home Savings Account offers a valuable opportunity for Canadians to access their dedicated cash for the purchase or construction of their first home.
By understanding the withdrawal rules and different types of withdrawals, Canadians can make informed decisions and use their FHSA funds effectively toward homeownership.
Types of FHSA Withdrawals
There are a few different types of withdrawals that Canadians can make from their FHSA account.
The rules for withdrawing from First Home Savings Accounts differ from both TFSA and RRSP accounts
Let’s go over the different types of withdrawals that you can make in your FHSA.
Qualifying Withdrawals
The primary purpose of an FHSA is to save for the purchase of a first home.
You can make a qualifying withdrawal from your FHSA to use the funds towards the down payment, closing costs, or other expenses related to buying a qualifying home.
These withdrawals are typically tax-free, meaning you won’t be taxed on the amount withdrawn
Taxable Withdrawals
If you need to withdraw funds from your FHSA for purposes other than a qualifying home purchase, these would be considered non-qualifying withdrawals.
Non-qualifying withdrawals may be subject to taxes and potential penalties, similar to the rules for withdrawals from an RRSP
Designated Withdrawals
A designated withdrawal occurs when you take money out of your FHSA account after you’ve surpassed your FHSA participation room.
If you overcontribute to your FHSA, you will have an excess FHSA amount, which will subject you to a tax penalty. When you have an excess FHSA amount, you will continue to pay the monthly 1% tax until the excess FHSA amount is eliminated.
If you have an excess FHSA amount, one of the ways that you can reduce or eliminate your excess FHSA amount is to make a designated withdrawal.
The amount of the designated withdrawal is not required to be included as income on your income tax and benefit return in the year.
FHSA Contribution Limit
The FHSA contribution limit refers to the maximum amount you can deposit into your First-Time Home Buyer’s Savings Account in a given year.
In Canada, the contribution limit for the first year that you open an FHSA is set at $8,000.
This applies to all of the FHSA accounts that you open. This means that the total amount you can contribute to all of your FHSAs and transfer from your RRSPs to all of your FHSAs cannot exceed your FHSA participation room for a given year.
If you don’t use up your entire FHSA contribution limit in a year, you can carry forward the unused amount to the following year. The maximum amount you can carry forward is $8,000. This unused amount is known as your FHSA carryforward.
It’s important to stay within this limit to make the most of the tax advantages associated with your FHSA. Exceeding the contribution limit can lead to potential tax implications or penalties
Lifetime FHSA Limit
In addition to the annual contribution limit, there is also a lifetime contribution limit for your FHSA.
The lifetime limit represents the maximum cumulative amount you can contribute to your FHSA over its existence.
In Canada, the lifetime FHSA contribution limit is currently set at $40,000.
This limit takes into account all the contributions made to your FHSA, regardless of the specific year.
How To Find Your FHSA Contribution Room
After you have opened your first FHSA, you can find the details about your contribution room on your notice of assessment or reassessment.
Understanding the amount of contribution room available allows Canadians to make more informed investment decisions when adding funds, withdrawing, and investing in their FHSA.
What Happens If You Contribute Too Much Money To Your FHSA?
As we noted earlier, there are some consequences that come along with contributing too much money to your FHSA.
If you overcontribute to your FHSA, you may be subject to additional taxes until you withdraw, transfer, or eliminate the excess funds from your account.
Let’s take a look at what happens when you contribute too much money to your FHSA.
Tax Consequences
Overcontributions to your FHSA are subject to a penalty tax. The excess amount will be taxed at a rate of 1% per month until it is withdrawn or eliminated through future contribution room.
Impact on Unused Contribution Room
Overcontributions do not increase your unused contribution room for future years. The contribution room is based on the annual limits set by the government, and overcontributions are not factored into this calculation.
How To Correct An Overcontribution To Your FHSA
To rectify an overcontribution, you have two options:
-
- Withdraw the Excess Amount: You can choose to withdraw the overcontribution, along with any associated earnings, from your FHSA. This will eliminate the tax penalty for the excess amount.
- Carry Forward the Excess Amount: Alternatively, you can leave the excess amount in your FHSA and carry it forward to future years, as long as you have available contribution room. However, the penalty tax will continue to apply until the excess amount is eliminated.
Contributions In The First 60 Days of the Year
Unlike RRSPs, the money you put into your FHSA during the first 60 days of the year cannot be claimed as a deduction on the previous year’s income tax and benefit return.
This means that you can’t count those contributions as a way to reduce the amount of tax you owe for the previous year.
It’s also important to keep in mind that once you start using the money from your FHSA, you won’t get the tax benefit of deducting the contributions you make afterward.
Once you make your first withdrawal from your FHSA that qualifies for a home purchase, you won’t be able to claim any future contributions as a tax deduction.
Tax Deductions For FHSA Contributions
The contributions that you make to your FHSAs may be deductible on your income tax and benefit return for the year of the contribution or a future year, similar to RRSP contributions.
The maximum deductible amount for your FHSA contributions is determined by the lesser of two options:
Option 1: The total of your annual FHSA limits for the current year and previous years, minus the total of your FHSA deductions for each previous year.
OR
Option 2: $40,000 minus the total of your FHSA deductions for each previous year, minus any amounts transferred from your RRSPs to your FHSAs for the current year and previous years.
If the result of this calculation is negative, the maximum deductible amount is set to $0.
If for any reason you’re unable or decide not to claim all or part of your available contributions as an FHSA deduction in the current year, don’t worry. You have the flexibility to carry forward that amount and potentially claim it as an FHSA deduction in a future year.
This allows you to make use of your unused FHSA contributions when it’s more suitable for you.
What Are The Best FHSA Stocks To Buy Right Now?
The best stocks to buy in your FHSA will depend on your appetite for risk, your investment strategy, and your overall financial goals.
For dividend investors, the top bank stocks like Royal Bank of Canada (RY.TO), National Bank (NA.TO), and Bank of Nova Scotia (BNS.TO) might be worth your consideration.
On the other hand, for growth investors, Shopify and Fortis could be a better fit for their investment goals.
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