Eighty-one percent of mortgage consumers surveyed by CMHC in 2026 said they believe homeownership is a good long-term financial investment. But reaching this important financial milestone can feel impossible without a solid savings plan.
Thankfully, in 2023, the federal government introduced First Home Savings Accounts (FHSAs), which provide tax-deductible contributions of up to $40,000 and tax-free qualifying withdrawals for Canadian first-time homebuyers.
Saving in an FHSA involves more than regularly setting aside money. To fully benefit from the account, keep these key points in mind.
There are a few foundational rules and limits to be aware of when using an FHSA:
The beauty of FHSA contributions is that they’re fully tax-deductible, like an RRSP. So, saving strategically can lower the income tax that prospective homebuyers owe to the CRA.
Furthermore, reinvesting your tax refunds back into an FHSA can accelerate its growth.
First-time homebuyers who have three years or more to save may want to grow their FHSA deposits by investing in growth equities, which can experience short-term fluctuations but often come out ahead in the long run.
Buyers with a shorter time frame in mind (i.e. two years or less) may want to focus on capital preservation by investing in lower-risk assets like GICs and money market funds.
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FHSAs are offered through financial service providers like banks, credit unions and investment brokerages, rather than directly through the Canadian government. Money deposited in an FHSA grows by earning interest (similar to a regular savings account) or through other investments like term deposits and GICs, depending on what your financial institution allows.
FHSA providers differ in the types of investments that can be held in an FHSA. Some providers, like banks, might pay interest—typically between 0.25% and 2.5% in the absence of higher promotional rates—or let you invest in term deposits or GICs. For example, the EQ Bank FHSA pays 1.75% interest but also supports investing in GICs.
On the other hand, an investment brokerage might let you grow your FHSA deposits through a wider range of investments like stocks, ETFs, mutual funds, GICs and bonds.
The types of investments you choose impact your savings. The default fixed interest rate paid by a Big Bank or a digital bank is often lower than the return you could get with other types of investments. When you also factor in the impact of inflation, uninvested money sitting in an FHSA account will lose more and more purchasing power over time.
Instead of depending on bank interest rates, you could put your funds towards qualified investments like stocks, ETFs, GICs, mutual funds etc. The value of your money grows if your investments yield positive returns through interest, dividends and/or capital appreciation.
Bear in mind that investments come with risk. Returns aren’t guaranteed, and the value of your portfolio can fluctuate.
A self-directed FHSA account with an investment brokerage like TD Direct Investing (TDDI) or Questrade lets you play a more active role in managing your FHSA investment account and potentially capture market growth over time.
For example, TD Direct Investing allows FHSA holders to invest in stocks, ETFs, mutual funds, GICs and bonds.
Plus, brokerages backed by major banks like TD, CIBC or Scotiabank can offer beginner investors the comfort of Big Bank backing, plus closed-loop instant transfers between personal and investment accounts and easy oversight of your financial activity.
As you compare FHSA providers, pay attention to the choice of investments each one offers, as well as fees, the level of control you have over your investments and the ease with which you can manage all your financial accounts, including your FHSA.
| Self-directed FHSA provider | Account fee | Trading fee | Ideal for |
|---|---|---|---|
| TD Direct Investing | $0 (if FHSA-only or account balance >$15,000; otherwise $25/quarter) | $0 select ETFs or $9.99 flat rate per trade otherwise | Big 5 bank loyalty and comprehensive market research tools |
| Interactive Brokers | $0 | Min $1.00, Max 0.5% | Advanced traders, lowest currency conversion (FX) rates, and global market access |
| Questrade | $0 | $0 for stocks & ETFs | Active traders and holding dual-currency (CAD/USD) assets |
| Wealthsimple | $0 | $0 for stocks & ETFs (1.50% FX fee on USD trades) | Beginners and hands-off trading |
| $0 | $0 for stocks, ETFs & mutual funds | Customer service, ESG tools, and credit union partnerships |
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"(This fictional example is for illustrative and educational purposes only and should not be considered a recommendation.)
Jordan wants to open an FHSA account and chooses TD Direct Investing to take advantage of the convenience of working with a Big Bank she’s known since childhood. She likes knowing that TD Direct Investing is a member of the CIPF, so her FHSA funds will be protected up to $1,000,000 should the brokerage become insolvent. Additionally, she feels reassured by TD Bank Group’s enterprise-level fraud protections and long-standing operational stability.
She opens the FHSA online in a few minutes and starts researching to build her portfolio.
She first opts into the Systematic Investment Program (SIP) to set up pre-authorized transfers of $100 to automatically invest funds from her TDDI account to avoid paying the $25 quarterly maintenance fee. She also sets up recurring instant transfers from her TD Unlimited Chequing Account to her TDDI FHSA through the TD Mobile App.
She then chooses to avoid the standard $9.99 trading fee by investing in TDDI’s selection of commission-free mutual funds and over 100 commission-free ETFs.
Jordan filters securities using TD Direct Investing’s screeners. To narrow down her investment choices even further, she uses WebBroker’s pre-built investment screeners to compare metrics like prices, dividend yields, historical returns, risk ratings and management expense ratios (MERs).
Since she’s looking to preserve her capital for a short time, she chooses to filter for relatively low-risk investments like Canadian high-interest savings and fixed-income ETFs.
After carefully comparing her options, Jordan starts investing and growing her FHSA towards her dream of owning her own home."
Steer clear of these pitfalls to amplify your home savings:
FHSA contributions for the calendar year are strictly cut off after December 31, unlike RRSPs, which let you make contributions up to 60 days into the new year.
Furthermore, FHSA contributions in excess of your annual limit are taxed 1% per month on the highest excess amount that month. The tax continues until you eliminate the excess amount (or the new year hits and your annual contribution limit resets and absorbs the excess amount).
Recovering from market declines can take time, which is why it’s risky to invest in volatile assets when you have a short withdrawal horizon.
Instead, short-term investors may prefer to focus on liquidity and capital preservation with low-risk investments like GICs, money market funds and fixed-income investments.
By carefully choosing a financial platform, executing an investment strategy that aligns with your time horizon and maximizing your contributions within your account’s prescribed limits, an FHSA can become a powerful vehicle for growing your savings and launching into homeownership faster.
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