If You're Saving for a House, a FHSA Is Smarter Than an RRSP

If You’re Saving for a House, a FHSA Is Smarter Than an RRSP

Understand the FHSA and its role in home savings. Make the most of tax benefits while saving for your first house.

Puja Tayal

Author Bio

Puja Tayal grew up in a small-business family where dinner conversations often centred on working capital and savings. Her early experiences with investing, particularly during the 2008 financial crisis, shaped her approach to understanding markets and evaluating investment opportunities. She began her career at a mutual fund company before moving into investor education and financial writing for asset and wealth management firms. Before joining The Motley Fool, Puja wrote for Market Realist, where she extensively covered the semiconductor industry. Her published work has also appeared in The Indian Express. Puja believes every stock has a story that can help investors understand its potential returns. She combines business analysis with different investing approaches to help investors make informed decisions and align their portfolios with their long-term financial goals. Outside of finance, Puja enjoys long drives, catching up with friends, watching superhero and science-fiction movies, and managing her family portfolio. She also has a keen interest in artificial intelligence and its potential to reshape the world.

Education

Bachelor's degree in Accounting and Finance, University of Mumbai (2007)
CFA Level I

Areas of Expertise

Qualitative company analysis, management strategy, risk assessment, long-term investing, portfolio diversification and rebalancing, dividend reinvestment, cyclical growth opportunities, compounding strategies, growth stocks, and dividend stocks.

Social Media Profiles

Favorite Investment Quote

"Risk comes from not knowing what you're doing." — Warren Buffett

Published December 29, 2025 5:00 pm EST

To make the big Canadian dream of owning a house possible, the Canada Revenue introduced the First Home Savings Account (FHSA) in April 2023. The FHSA helps first-time homebuyers save for the downpayment of their house. You can deduct the FHSA contributions from your taxable income just like a Registered Retirement Savings Plan (RRSP). You can also withdraw the FHSA amount tax-free if you are withdrawing it to buy a house.

real estate and REITs can be good investments for Canadians — Source: Getty Images

Repayment obligation

The RRSP has the option to use a Home Buyers Plan (HBP) withdrawal, which is capped at $60,000. However, it has a condition. The HBP withdrawal must be repaid within 15 years, with the repayment period beginning in the second year after the year of withdrawal. Moreover, the amount designated towards HBP repayment has no tax benefit.

That is not the case with FHSA. It has a 15-year life, and the lifetime contribution is capped at $40,000. You can contribute $8,000 every year in the FHSA and grow your investments tax-free. When you have finalized your home, and it is time to make the down payment, you can withdraw the entire amount tax-free with no obligation to repay.

If your $40,000 investment becomes $75,000, the entire amount goes towards house buying, and any amount you contribute to an RRSP is eligible for a tax deduction.

You can combine the FHSA and HBP

If you have already built a sizeable RRSP portfolio, you might still want to contribute to FHSA. Remember, FHSA contributions and withdrawals are tax-free with no limit, whereas HBP has a limit. If you have more than $60,000 in your RRSP, prioritize FHSA contributions. You can combine both FHSA and HBP withdrawals and make a bigger downpayment, thereby reducing the mortgage amount.

Instead of repaying a higher mortgage, you can divert those funds towards repaying the HBP. The HBP repayment may not be tax-deductible, but you can invest it in stocks and earn capital gains and dividends.

What happens to the FHSA if you don’t buy a house

15 years is a long time. You may have built an FHSA to buy a house, but now the plans have changed. In such a scenario, you can transfer that amount tax-free to an RRSP and boost your retirement portfolio. If you withdraw from an FHSA for reasons other than buying a house, it will be subject to withholding tax.

Two perfect FHSA stocks for 2026

The FHSA’s tax-free withdrawals make it ideal for wealth-generating investments. The year 2026 is filled with uncertainties. Either the market could crash due to a prolonged tariff war or it could recover. A good strategy is to invest in contrarian stocks.

Lundin Gold

Lundin Gold (TSX: LUG) is a buy in the current market uncertainty, as central banks worldwide are buying gold reserves. The tariff war and geopolitical tensions are reshaping the global supply chain. If a new global crisis is shaping, gold will be an assured winner and outperform all asset classes.

Lundin Gold would be a key beneficiary of rising gold prices because of its lower all-in sustaining costs (AISC). It had an AISC of US$957 per ounce in the first nine months of 2025 and expects to end the year with AISC in the range of US$935- US$995 per ounce. The gold price is currently hovering above US$4,500. For every $100-per-ounce increase in gold price, Lundin’s AISC will increase by approximately $10 per ounce.

Because of Lundin’s AISC advantage, its share price tends to rise higher than other gold mining stocks when the gold price rises. You can consider investing $2,000 in this stock through your FHSA and sell it if the investment doubles. Remember, gold stocks are cyclical and underperform in a strong economy. Hence, you should book profits at intervals to benefit from gold price volatility.

Constellation Software

Constellation Software (TSX: CSU) is a stock that will likely perform well in a growing economy. The software holding company earns money from maintenance renewals of licensed software operating at thousands of different verticals, supporting mission-critical applications worldwide. An uptick in economic recovery could drive up the valuations of software companies and boost Constellation’s share price.