Tax Free First Home Savings Account

Trish Pritchard • April 4, 2023

Canada’s new tax-free First Home Savings Account kicks in April 1. Here’s what you need to know

The dream of home ownership may be a just little closer this year for Canadians, with the introduction of a new tax-free first home savings account. The new Tax-Free First Home Savings Account (FHSA) rolls out April 1, 2023 with the intention of helping Canadians save towards their first home.

Home affordability in Canada has been a significant challenge for first-time buyers. The high cost of housing in major cities, combined with low inventory levels and increased demand, has led to a surge in home prices. This has made it difficult for first-time buyers to save enough for a down payment, let alone afford a mortgage.

The pandemic has further exacerbated the situation, with many Canadians experiencing job losses or reduced income. As a result, the dream of owning a home has become increasingly out of reach for many young Canadians, and policymakers are grappling with solutions to make housing more affordable.


Enter the Tax-Free First Home Savings Account (FHSA)

Part of the Liberal government’s 2022 federal budget proposal tackled the ever-growing issue of home affordability. They’ve introduced a new way to save up to $40,000 for your first home, tax-free, called the Tax-Free First Home Savings Account (FHSA).

You can open your new Tax-Free First Home Savings Account from April 1, 2023 and it will allow Canadians who are at least 18 to save up to $40,000 for their first home.

If eligible, you can contribute up to $8,000 each year to the account but you have to use these funds within 15 years of first opening an FHSA or before you turn 71 (whichever is earlier), otherwise the account would have to be closed.


What are the benefits of the Tax-Free First Home Savings Account (FHSA)?

This new account is a great way to save for your homebuying goals because you don’t pay a tax bill on gains from these savings. For example, if you save $40,000, invest that amount, and gain $20,000 on your investment, you’ll now have $60,000 to put towards your house purchase as the $20,000 would be essentially tax-free. Similar to a Registered Retirement Savings Plan (RRSP), which gives you tax-deduction perks, and a Tax-Free Savings Account (TFSA), as your investments grow, they are not taxed. This means that the money you put in and earn in this account goes towards the down payment of your first home.


Who is eligible for the Tax-Free First Home Savings Account (FHSA)?

So, who can use the new account? There are three important components to qualify for this investment vehicle.

  • You need to be a resident of Canada
  • You have to be at least 18 years of age (or the age of majority in your province or territory)
  • You or your spouse can’t own a home in which you lived, at any time in the year the account is opened or during the previous four calendar years


Am I eligible for the FHSA if my spouse is a homeowner but I’m not?

You are not eligible for the FHSA if your spouse’s property has been your principal place of residence in the current year or in the last four years.

However, if you separate and don’t live in that residence for at least four years and don’t purchase another property yourself, you’re then eligible to open an FHSA.

However, if you no longer have a spouse who’s an owner and you have not owned your main place of residence yourself for more than 4 years, you’re then eligible to open an FHSA.


How long do I have to buy my first property with the Tax-Free First Home Savings Account?

You’re allowed to hold an FHSA for 15 years or until age 71. This means that you have until December 31 of the year in which you either reach the 15th anniversary of your account opening or turn 70 to use your FHSA to purchase your first property.

Your FHSA must be closed by December 31 of the year following the date of your first qualifying withdrawal.


What do I do with unused money in my FHSA?

Suppose you bought a property, but still have money left over in your FHSA. If you still have money in your FHSA at the time of closing, several options are open to you:

  1. Make a tax-free direct transfer to an RRSP or RRIF without affecting your RRSP contribution room.
  2. Withdraw the money, which is subject to tax withholding, and deposit it into a daily chequing account. You could also reinvest it in a TFSA, for example.


What’s the difference between the FHSA and HBP?

You may already be familiar with the HBP Home Buyers Plan, which is a Canadian government program that allows first-time homebuyers to withdraw up to $35,000 from their registered retirement savings plan (RRSP) to use as a down payment on their first home. HBP is also designed to help Canadians enter the housing market by providing them with tax-free funds to put towards the purchase of their first home. However, there are key difference between the newly-introduced FHSA and the HBP.


FHSA (tax-free first home savings account)

The Tax-Free First Home Savings Account is a new registered account that provides tax-free savings for first-time home buyers.

  • No repayment required
  • No withdrawal limit
  • Maximum annual contributions of $8,000 and a lifetime total of $40,000
  • No minimum holding period required for contributions to be deductible and eligible for withdrawal
  • The deadline for contributions to a FHSA is December 31 of each year


HBP (Home Buyer’s Plan)

The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your RRSP to buy or build a first home.

  • Repayment required
  • Withdrawal limit of $35,000
  • Maximum annual contributions of the RRSP, which is 18% of your previous year’s income or the current fixed contribution limit
  • The money must be deposited into your RRSP 90 days before you withdraw it under the HBP
  • Deadline for RRSP contributions: 60 days after the end of the year


Can I combine the FHSA and HBP?

Yes, you can combine the FHSA with the HBP. In addition to making a withdrawal from your FHSA for the purchase or construction of a first home, you can also draw up to $35,000 from your RRSP under the HBP program. Are you a couple? You can each combine your respective FHSA accounts with an HBP withdrawal to maximize your down payment.


This article was originally published on Deeded.ca here.
TRISH PRITCHARD
MORTGAGE BROKER

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Buying a Vacation Property or Rental? Here’s What Lenders Look For

By Trish Pritchard • June 3, 2026
Owning a vacation home or an investment rental property is a dream for many Canadians. Whether it’s a cottage on the lake for family getaways or a rental unit to generate extra income, real estate can be both a lifestyle choice and a smart financial move. But before you dive in, it’s important to know what lenders look for when financing these types of properties. 1. Down Payment Requirements The biggest difference between buying a primary residence and a vacation or rental property is the down payment. Vacation property (owner-occupied, seasonal, or secondary home): Typically requires at least 5–10% down, depending on the lender and whether the property is winterized and accessible year-round. Rental property: Usually requires a minimum of 20% down. This is because rental income can fluctuate, and lenders want extra security before approving financing. 2. Property Type & Location Not all properties qualify for traditional mortgage financing. Lenders consider: Accessibility : Is the property accessible year-round (roads maintained, utilities available)? Condition : Seasonal or non-winterized cottages may not meet standard lending criteria. Zoning & Use : If it’s a rental, lenders want to ensure it complies with municipal bylaws and zoning regulations. Properties that fall outside these norms may require financing through alternative lenders, often with higher rates but more flexibility. 3. Rental Income Considerations If you’re buying a property with the intent to rent it out, lenders may factor the rental income into your mortgage application. Long-term rentals : Lenders typically accept 50–80% of the expected rental income when calculating your debt-service ratios. Short-term rentals (Airbnb, VRBO, etc.) : Many traditional lenders are cautious about using projected income from short-term rentals. Alternative lenders may be more flexible, depending on the property’s location and your financial profile. 4. Debt-Service Ratios Lenders use your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to determine if you can handle the mortgage payments alongside your other obligations. With investment or vacation properties, lenders may apply stricter guidelines, especially if your primary residence already carries a large mortgage. 5. Credit & Financial Stability Your credit score, employment history, and overall financial health still matter. Since vacation and rental properties are considered higher risk, lenders want reassurance that you can handle the additional debt—even if rental income fluctuates or the property sits vacant. 6. Insurance Requirements Rental properties often require specialized landlord insurance, and vacation homes may need coverage tailored to seasonal or secondary use. Lenders will want proof of adequate insurance before releasing mortgage funds. The Bottom Line Buying a vacation property or rental can be exciting, but financing these purchases comes with extra rules and considerations. From higher down payments to stricter property requirements, lenders want to be confident that you can handle the responsibility. If you’re considering a second property, the best step is to work with a mortgage professional who can compare lender requirements, outline your options, and find the financing that works best for you. Thinking about making your dream of a vacation or rental property a reality? Connect with us today.

What to Expect in the Closing Process: A Step-by-Step Guide

By Trish Pritchard • May 27, 2026
You’ve found the right home, your offer’s been accepted, and your financing is approved—congratulations! But before you can pick up the keys and celebrate, there’s one more important stage: the closing process. Closing is the final step in your homebuying journey, where all the paperwork, legal details, and financial transactions come together. It can feel overwhelming if you don’t know what to expect, but with the right preparation, closing can be smooth and stress-free. Here’s a step-by-step guide to help you understand the process. Step 1: Hire a Lawyer or Notary A real estate lawyer (or notary, depending on your province) handles the legal side of closing. They will: Review the purchase agreement and mortgage documents Conduct a title search to confirm the seller has the legal right to sell the property Ensure the mortgage lender is properly registered on the title Handle the transfer of funds between you, the lender, and the seller Your lawyer or notary will be your main point of contact during closing, so choose one you trust and who communicates clearly. Step 2: Finalize Your Mortgage Your lender will send the mortgage instructions directly to your lawyer or notary. At this stage: You’ll provide proof of property insurance (lenders require this before releasing funds) You’ll confirm your down payment and closing costs are available in your lawyer’s trust account The lawyer will prepare all documents for your review and signature Step 3: Pay Closing Costs Closing costs typically range from 1.5% to 4% of the purchase price. These can include: Legal fees Title insurance Land transfer tax (where applicable) Adjustments for property taxes or utilities prepaid by the seller Home inspection or appraisal fees (if not already paid) Your lawyer will provide a final statement of adjustments so you know exactly how much is due on closing day. Step 4: Sign the Paperwork A few days before closing, you’ll meet with your lawyer or notary to sign all the necessary documents, including: Mortgage agreement Title transfer Insurance confirmations Statement of adjustments Bring valid government-issued ID to this appointment. Step 5: Transfer of Funds On the day of closing: Your lender sends the mortgage funds to your lawyer Your lawyer combines these funds with your down payment and pays the seller Legal ownership of the property is transferred into your name The lender is registered on title as a secured creditor Step 6: Get the Keys! Once the paperwork is filed and the funds have cleared, your lawyer will confirm that the transaction is complete. You’ll then get the keys to your new home—officially making it yours. The Bottom Line The closing process is a series of important steps, but with the right team in place, it doesn’t have to be stressful. By working closely with your mortgage professional and lawyer, you’ll have guidance every step of the way—from signing the documents to turning the key in the front door. If you’d like help preparing for the closing process—or want a clear breakdown of your own closing costs— connect with us today.

Stress-Testing Your Mortgage Affordability: Why It Matters

By Trish Pritchard • May 20, 2026
Buying a home is one of the biggest financial commitments you’ll ever make. That’s why lenders want to be sure you can handle your mortgage payments—not just today, but also if interest rates rise in the future. This is where the mortgage stress test comes in. Many Canadians hear the term but aren’t entirely sure what it means or how it affects them. Let’s break it down in plain language. What Is the Mortgage Stress Test? The stress test is a rule introduced by the federal government that requires all mortgage applicants to qualify at a higher rate than the one they’ll actually pay. Currently, you must qualify at the greater of your contract rate + 2% or the benchmark qualifying rate (set by the Office of the Superintendent of Financial Institutions). For example: If your lender offers you a 5-year fixed mortgage at 5.25%, you must show you could still afford the payments at 7.25% . Even if rates don’t rise that high, the stress test ensures you won’t be overextended if they do. Why Does It Matter? The stress test protects both borrowers and lenders by: Preventing over-borrowing : It ensures you don’t take on more debt than you can realistically handle. Preparing for rate hikes : With interest rates fluctuating, it’s a safeguard against sudden increases. Strengthening financial stability : It lowers the risk of defaults, protecting the housing market as a whole. While it can sometimes feel like a barrier—reducing the amount you qualify for—it’s ultimately designed to keep you from becoming “house poor.” How Does It Impact Buyers? The stress test can significantly affect your homebuying budget. For example, without it, you might qualify for a $600,000 mortgage, but with the stress test applied, you may only qualify for $500,000. That doesn’t mean your dream of homeownership is out of reach—it just means you may need to adjust expectations or explore other strategies, such as: Increasing your down payment Paying down existing debts Considering alternative lenders who may have different qualification standards Why Work With a Mortgage Professional? Every lender applies the stress test, but not every lender views your application the same way. An independent mortgage professional can: Shop multiple lenders to find the best fit Run affordability scenarios at different rates Help you understand how much house you can truly afford—without stretching your finances too thin The Bottom Line The mortgage stress test isn’t meant to stop you from buying a home—it’s there to protect you from financial strain down the road. By understanding how it works and planning ahead, you can make smarter choices and buy with confidence. If you’re thinking about purchasing a home, refinancing, or simply want to know how the stress test affects your options, connect with us today. We’ll help you stress-test your budget and find the mortgage solution that works best for you.