Short answer
An excess FHSA amount can generally attract a 1% tax per month on the highest excess amount for that month until the excess is eliminated.
The client’s real concern
Money is moved from an RRSP and a chequing account into different FHSAs close to closing. Each institution accepts the transaction, but the combined deposits exceed the buyer’s total room.
What the official rule says
CRA treats the room across all FHSAs as one limit and explains designated withdrawals or transfers that may help correct an excess. Required forms and timing depend on the facts.
What this does not guarantee
Withdrawing money casually is not automatically a tax-free correction. A designated withdrawal is limited by the excess and must follow CRA requirements. Mortgage urgency does not change the tax rules.
A practical Ontario example
Illustration only: A buyer with $8,000 of available room contributes $8,000 and also transfers $5,000 from an RRSP. The transfer is not extra room; it may create a $5,000 excess.
What I would check before relying on the money
Pause additional transfers, confirm the room with CRA and obtain tax advice on the proper correction. Tell the mortgage broker if the available down payment changes rather than replacing it with unexplained borrowed funds.
- Which program are you using: FHSA, HBP, both, or another source?
- Who owns the account and independently meets that program’s definition?
- When were funds contributed, and when must they be withdrawn?
- Will the full bank, RRSP or FHSA trail satisfy the lender and lawyer?
- What cash remains for the deposit, adjustments, tax, legal costs and emergencies?
Rajiv’s broker perspective
Tax eligibility and mortgage approval are two separate tests. CRA determines whether the withdrawal or credit qualifies under tax law. The lender, mortgage insurer where applicable, and lawyer separately examine ownership, source of funds, borrowed down payment, timing and affordability. I would build one funds-to-close schedule first, then compare suitable A-lender, alternative/B, MIC or private options only if the complete mortgage facts require them. A tax benefit should support the plan—not hide a cash shortfall.
Related: First-Time Buyer Rule Hub · Mortgage Knowledge Centre · Updates & Rules Centre
Will your down payment be ready when the offer becomes firm?
Send Rajiv the purchase timeline, account types, contribution dates, expected withdrawals and available closing cash. He can prepare a practical funds-to-close review and identify questions that need your accountant or lawyer before you commit.