Say you rent, you’ve always rented, and you want to stop renting. The account built for that situation is the first home savings account (FHSA): a registered account for Canadians saving toward a first home. It borrows the best feature of the RRSP (contributions are tax-deductible) and the best feature of the TFSA (a qualifying withdrawal to buy or build that home comes out tax-free). No other account in the Canadian system gives you both ends of the tax break on the same dollar.
That’s the short version of how an FHSA works, and it really is that good. The CRA and the bank explainers will walk you through the rules; what they consistently skip is what FHSA money actually earns while it waits. Every rate in this guide is read straight off Ratehunter’s own boards, from our August 26 observations.
Who can open one, and what the break is worth
You can open a first home savings account if, at the time of opening, you are:
- a resident of Canada;
- at least 18 (or the age of majority in your province);
- not past December 31 of the year you turn 71; and
- a first-time buyer, which has a specific meaning: neither you nor your spouse or common-law partner owned a home that you lived in during this calendar year or the previous four calendar years.
That last test is stricter at opening than at withdrawal. If your spouse owns the home you live in, you generally can’t open an FHSA, but a spouse’s ownership doesn’t automatically block a qualifying withdrawal later. The renter in the opening paragraph almost certainly qualifies.
The tax break has two ends. Money going in reduces your taxable income the way an RRSP contribution does: at an assumed 30% combined marginal rate (yours depends on income and province), an $8,000 contribution is worth $2,400 off your tax bill, and you can hold the deduction for a higher-income year instead of claiming it immediately. Inside the account, interest and growth are untaxed. When you make a qualifying withdrawal for a first home, the whole balance comes out tax-free with nothing to repay. Contributions are capped at $8,000 per year and $40,000 lifetime, with limited carry-forward of unused room; the room mechanics are a story of their own, told in full in our FHSA contribution rules explainer.
What FHSA money actually earns
An FHSA is a container, not a product. Inside it you can hold savings deposits, GICs, mutual funds and other qualified investments. This site covers the deposit side: if your buying window is one to five years out, a GIC locks a known rate for a known term, and FHSA deposits at CDIC member institutions carry deposit insurance like other eligible deposits, worth confirming for the institution you pick.
The CRA wrote the rulebook; nobody there will tell you what the account should pay. That part is our job. The FHSA lane on our boards, set against the wider market:
| Term | Best FHSA GIC on our boards | Best GIC, non-registered | Big-bank posted average |
|---|---|---|---|
| 1 year | 3.45% (Moya Financial) | 4.00% | 2.93% |
| 2 years | 3.50% (Meridian Credit Union) | 4.25% | 3.06% |
| 3 years | 3.70% (Meridian Credit Union) | 4.05% | 3.12% |
| 4 years | 3.80% (Meridian Credit Union) | 4.10% | 3.23% |
| 5 years | 4.00% (Meridian Credit Union) | 4.30% | 3.35% |
The big-bank column is the average posted rate for non-registered, non-redeemable GICs from the same boards.
First, the gap versus the big banks is real money. A maxed-out $40,000 FHSA in the 4.00% five-year leader earns about $1,600 a year; at the 3.35% big-bank posted average it earns about $1,340. Over a five-year term with annual compounding, that’s roughly $1,500 more interest for holding the same product somewhere hungrier.
Second, the FHSA lane is thinner than the open market. The best one-year GIC anywhere on our boards pays 4.00%; the best one-year FHSA GIC pays 3.45%. Fewer institutions compete for FHSA deposits, so the top of the lane trails the top of the market at every term, and shopping the lane specifically on the FHSA board matters more here than in any other tax lane. For context, if you’d rather stay liquid than lock a term, the top of our HISA board sits at 2.75% right now, and coverage there is thinner than on our GIC boards.
FHSA vs TFSA vs RRSP for a first home
For a saver whose goal is specifically a first home, the three accounts line up like this:
| FHSA | TFSA | RRSP (Home Buyers’ Plan) | |
|---|---|---|---|
| Contributions deductible | Yes | No | Yes |
| Growth taxed | No | No | Deferred |
| Withdrawal for a first home | Tax-free, no repayment | Tax-free (any purpose) | A loan from yourself: up to $60,000, repaid over 15 years |
| Annual room | $8,000 | $7,000 for 2026 | 18% of last year’s earned income, up to a dollar cap |
| If you never buy | Rolls to an RRSP tax-free | Nothing changes | Nothing changes |
For the first-home goal, the FHSA’s column reads best on the merits: it matches the RRSP’s deduction, matches the TFSA’s tax-free exit, and unlike the Home Buyers’ Plan there is no repayment schedule following you into homeownership. The accounts also stack. A qualifying FHSA withdrawal and an HBP withdrawal can go toward the same home (FHSA vs the Home Buyers’ Plan walks through the pairing), and the TFSA stays free for every other goal. Which lane your dollars fill first is your call, one we work through in TFSA vs RRSP vs FHSA; the table is why the FHSA column keeps winning it.
Taking the money out, or never buying at all
A tax-free qualifying withdrawal needs these boxes ticked at withdrawal time:
- a written agreement to buy or build a qualifying home in Canada, with a completion date before October 1 of the year after the withdrawal;
- first-time-buyer status under the withdrawal-time test no home you owned and lived in earlier this calendar year or in the previous four calendar years;
- the intention to occupy the home as your principal residence within one year of buying or building it; and
- the withdrawal paperwork filed with your institution form RC725, rather than simply draining the account.
Meet the tests and the entire balance, growth included, can come out in one tax-free withdrawal.
If you never buy, the account has a shelf life: broadly 15 years from opening or the year you turn 71, whichever comes first. The quiet second-best outcome is that you can transfer the full balance to your RRSP or RRIF without triggering tax, and the transfer does not use up RRSP contribution room. An FHSA that never buys a house becomes bonus RRSP room — deducted years earlier. The genuinely bad outcome is a straight cash withdrawal, which is taxable.
For the edge cases (excess contributions, marriage or common-law breakdown, leaving Canada, death of an account holder), the CRA’s FHSA pages are the rulebook and the right place to read. What they will never tell you is where to open the account or what it should earn, which is the half of the question this page exists for.
Shopping a thin lane
If a first home is the goal and you haven’t opened an FHSA, the account itself is close to a free lunch; the rate inside it is not, and a thin lane rewards shoppers. Check the current FHSA board for the live leaders by term, and set a rate alert so you hear when the top of the lane moves.
Frequently asked questions
How does an FHSA work?
You contribute up to an annual limit, deduct the contribution from taxable income like an RRSP, and let the balance grow untaxed. When you buy or build a qualifying first home, everything comes out tax-free like a TFSA, with no repayment. If you never buy, the balance can roll into an RRSP tax-free.
What are the FHSA withdrawal rules?
A tax-free qualifying withdrawal requires a written agreement to buy or build a home in Canada, first-time-buyer status under the withdrawal-time test, and the intention to occupy the home as your principal residence within one year. Withdrawals that don’t meet the tests count as taxable income.
What are the best FHSA rates in Canada?
On our boards, the FHSA GIC lane tops out at 3.45% for one year (Moya Financial) and 4.00% for five years (Meridian Credit Union). The lane moves, so the live FHSA board is the current answer.
Is an FHSA better than a TFSA for saving for a first home?
For that specific goal the FHSA adds a tax deduction the TFSA doesn’t offer, and its withdrawal for a first home is equally tax-free. The TFSA stays more flexible, since its money can go to any purpose. The comparison table above lays out the trade; the accounts also work side by side.
Rates referenced in this article were checked against Ratehunter's data on the publication date shown above and may have changed since — the rate boards always carry the current numbers. See our editorial standards andadvertiser disclosure.