5 Smart FHSA Investment Tips for New Homebuyers

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5 Smart FHSA Investment Tips for New Buyers

Jun 22, 2025

5 Smart FHSA Investment Tips for New Homebuyers

Buying your first home is an exciting milestone, but saving enough money for a down payment can feel overwhelming. Luckily, the First Home Savings Account (FHSA) is designed to help Canadians like you save money faster with tax benefits and investment opportunities. If you’re a first-time buyer, understanding how to make the most of your FHSA investment can bring you closer to owning your dream home sooner.

In this post, we’ll cover five smart tips to help new buyers use their FHSA investments wisely. These tips will guide you through making smart choices that grow your savings efficiently while avoiding common pitfalls.

What Is an FHSA Investment?

Before diving into the tips, here’s a quick overview. An FHSA is a special savings account that combines the best features of RRSPs and TFSAs. You can contribute up to $8,000 each year, with a lifetime limit of $40,000. The money you put in can grow tax-free, and withdrawals for buying your first home are also tax-free — but only if you follow the rules. Investing your FHSA money wisely means choosing the right options that help your savings grow faster while keeping your money safe.

1. Start Early to Maximize FHSA Investment Growth

The earlier you open your FHSA, the better. Even small contributions add up over time thanks to compound growth — which means you earn returns not only on your contributions but also on your earnings. For example, if you contribute $8,000 a year starting at age 25, your FHSA investment has more years to grow compared to starting at 30 or later.

Early investing also lets you take advantage of different investment options rather than keeping your money in cash, where it may lose value to inflation. So don’t wait until you’re ready to buy — start saving as soon as you can.

2. Choose Growth-Oriented Investments

Your FHSA investment doesn’t have to stay in a regular savings account. In fact, one of the best ways to grow your savings is by choosing growth-oriented investments like exchange-traded funds (ETFs), mutual funds, or index funds. These options have the potential to earn higher returns over time compared to traditional savings accounts.

Because the FHSA is designed for a long-term goal (buying a home), you can afford to take some investment risk early on to maximize growth. Just make sure you pick investments that fit your risk tolerance and timeline.

3. Keep Track to Avoid Over-Contributing

Each year, you can contribute a maximum of $8,000 to your FHSA, with a lifetime limit of $40,000. It’s important to keep track of how much you’ve deposited because exceeding these limits results in a penalty — 1% per month on the excess amount until you fix it.

Using budgeting tools or apps that track your contributions can help prevent over-contributing. You can also contact your financial institution to get updates on your FHSA balance and contribution room.

4. Coordinate Your FHSA Investment with RRSPs and TFSAs

The FHSA is a powerful savings tool, but it works best when combined with your other accounts. For example, the RRSP offers the Home Buyers’ Plan (HBP), which allows you to withdraw up to $35,000 tax-free to buy your first home, but you have to pay it back over 15 years. Meanwhile, the FHSA withdrawals for home purchases do not need to be repaid.

By coordinating your FHSA investments with your RRSP and TFSA savings, you can maximize your total savings and tax benefits. Plan how much to save in each account based on your timeline and home-buying goals.

5. Withdraw FHSA Funds at the Right Time

You want to make sure you withdraw your FHSA money only when you’re eligible, to avoid taxes or penalties. To withdraw tax-free, you need to be a first-time home buyer, have a qualifying home purchase agreement, and withdraw within the correct time frame (usually by October 1 of the year following the purchase).

If you don’t buy a home within the required period, you can transfer your FHSA funds to an RRSP or RRIF without tax consequences, but withdrawals for other reasons will be taxed. Planning your withdrawal carefully ensures you keep the full benefits of your FHSA investment.

Conclusion

Saving for your first home can feel challenging, but the FHSA investment gives you a great advantage. By starting early, choosing smart investments, keeping track of contributions, coordinating with other accounts, and timing your withdrawals, you can make your FHSA work hard for you. Use these five smart tips to boost your savings and take confident steps toward buying your first home. Your dream home is closer than you think!