Where to open a First Home Savings Account
Are you a first-time home buyer thinking of giving the First Home Savings Account (FHSA) a try? The FHSA was launched on April 1, 2023, and just a few challenger banks had released their accounts. Most banks and financial institutions now offer the account - although the features and investment types available in FHSAs may differ from other registered accounts. Learn more about where to find an FHSA and what things to look for before you sign up.
The First Home Savings Account: An overview
There’s been a lot of buzz about the First Home Savings Account – a tool designed to help first-time home buyers save up for a down payment – since it was first announced in the 2022 Federal Budget.
The account combines the best features of an RRSP and TFSA: it’s tax-deductible, meaning savers will receive a return on their deposits each tax year, and won’t be taxed on any income earned on investments housed within the account. Funds are also not taxed at withdrawal, like with a TFSA, as long as the account holder has entered into an agreement to purchase a home. Up to $8,000 can be contributed to the FHSA by an individual per year, up to a lifetime maximum of $40,000. Partners who are saving for a home purchase together, and can both be defined as first-time buyers, can combine their saving room for a total of $80,000.
And savers can open the account without immediate plans to buy; the FHSA can be kept open for a maximum of 15 years, or until the account holder turns 71; and like an RRSP, the funds must then be transferred into a RRIF. Account holders can also choose at any time to transfer their FHSA into an RRSP without tax penalty, should they choose not to use the money for a home purchase. To be eligible, account holders must be 18 years of age, be defined as a first-time home buyer, and be a Canadian resident.
And it appears these features are hotly anticipated by would-be buyers.
“Our research indicates Canadians have been eagerly awaiting the FHSA, with almost one-third of those who aren’t yet homeowners telling us they were planning to use this new account to save for a home purchase,” says Erica Nielsen, RBC’s executive vice president of Personal Banking & Investments. “This new savings and investing account will be a tremendous support to anyone who has that dream.”
Where can I open an FHSA?
Since its launch in August 2023, the FHSA has been made available the following banks and financial institutions. FHSA accounts may be either savings accounts with a high rate of interest, or investment accounts where you can grow your money by investing in the stock market. Investment accounts are ideal for those with a medium-to-long time horizon for home ownership. You can open an FHSA with the following providers:
Major banks:
- TD Bank: Investment account that holds cash, GICs or mutual funds
- National Bank: Clients can set up an appointment to get started. According to their website, GICs, mutual funds and cash savings can be held in the National Bank FHSA account while stocks and bonds are coming soon.
- Royal Bank of Canada: (via RBC Direct Investing and RBC InvestEase; the account can be opened either digitally or by speaking to a financial advisor at an RBC branch. Clients can invest using the robo advisor platform or invest the funds themselves using Direct Investing).
- Scotiabank: Available online or in-branch. You can invest in GICs, mutual funds, or hold cash savings with the Savings Accelerator Account.
Online banks and fintechs:
- Questrade: Available online. Customers can either hold cash in the account or invest in stocks, ETFs and more through their self-directed investing platform
- EQ Bank: Available online as a savings account. You can buy a GIC for the account.
- Wealthsimple: Available online as part of their managed investing (robo-advisor) account or self-directed investing account
- Desjardins: Available as a savings account with a high promotional rate of interest
- Saven Financial: Available online as a savings account
The bottom line
There are many potential benefits of using the FHSA: savers and investors can get a significant tax return each year they deposit funds into the account, and can grow their money at an accelerated rate without taxation. The account offers decent flexibility for those who ultimately decide homeownership isn’t for them, with the ability to transfer funds to an RRSP or RRIF.