Short answer
An FHSA can combine a tax deduction for eligible contributions with a tax-free qualifying withdrawal. The first year’s participation room is $8,000 and the general lifetime limit is $40,000, but the account, contribution room, withdrawal conditions and closing timeline all need attention.
The concern behind the question
The buyer has money in savings and plans to move it into an FHSA just before closing. The tax idea may be sound, but a late transfer, excess contribution, ineligible withdrawal or missing form can complicate the file.
What the current rule says
- FHSA participation room starts only after the first FHSA is opened; the first-year room is $8,000.
- Unused room can carry forward subject to CRA’s rules, and the general lifetime contribution/transfer limit is $40,000.
- Eligible FHSA contributions are generally deductible. A direct RRSP-to-FHSA transfer is not a new deduction.
- For a qualifying withdrawal, the buyer needs Form RC725, a written agreement and the required purchase or construction timeline.
- The buyer must occupy or intend to occupy the qualifying home as a principal residence within one year.
A practical Ontario example
Illustration only: Noah opens his first FHSA in December but assumes he earned room for prior years. He did not. Rajiv asks him to confirm the available room through CRA before transferring funds and keeps the statements so the lender can follow the money into and out of the FHSA.
Where buyers get caught
- Waiting to open the account because room does not accumulate before opening.
- Contributing above confirmed room.
- Assuming an RRSP transfer produces another deduction.
- Requesting the withdrawal too late for the institution, lawyer and lender documentation.
Where the lender decision is separate
This program does not approve the mortgage. An A lender still applies its own income, credit, debt-ratio, down-payment and property rules. When the down payment is below 20%, the lender normally submits the file to a mortgage insurer, and the insurer must also accept it. An alternative or B lender may take a broader view of income or credit, but usually requires more equity and may charge a higher rate and fees. MIC and private financing is normally a short-term, equity-based route with a clearly costed exit—not a first-time-buyer benefit.
Rajiv would compare the available route, total cash needed, monthly payment, conditions and exit plan. Government eligibility and lender approval answer different questions.
Do not let good money create a documentation problem
Keep the full trail for the deposit, down payment and closing money. If there is a large deposit, transfer or gift in the account during the lender’s review period, keep the statements and documents showing where it came from. Do not move the same money through several accounts unless there is a reason and a complete trail. A tax program may allow a withdrawal, but the lender and lawyer still need acceptable proof of funds.
Facts, assumptions and professional roles
The linked government source describes the public program. It does not state an individual lender’s underwriting policy. A lawyer should confirm the purchase contract, title and land-transfer-tax treatment. An accountant or qualified tax professional should confirm personal tax consequences. Rajiv’s role is to connect the verified mortgage file, closing cash and property to lenders whose current policies may fit.
Source checked 2026-09-07: Read the official government source.
What Rajiv would review before you rely on this
- Which definition of “first-time buyer” applies to the exact program?
- Is the home new, resale, substantially renovated or owner-built?
- Will it be your principal residence, and when will you occupy it?
- Is the benefit credited at closing, claimed later, or dependent on another form?
- Does your mortgage file still qualify without counting an expected refund?
Related AskRajiv pathways
Continue through the First-Time Buyer Rules Hub, the Mortgage Knowledge Centre, or the Real Estate Centre. If an offer is already accepted, use the closing-problem pathway before removing a condition or missing a deadline.
Get the first-home strategy checked
A rule can save money and still leave a financing gap if the timing, documents or property do not fit. Book a First-Home Mortgage Strategy Session with Rajiv Verma, Mortgage Broker. Bring the purchase timeline, income documents, available cash, registered-plan statements and any builder paperwork. Rajiv can identify what is confirmed, what is assumed and what must be checked before you commit.