Rising home prices and tighter mortgage qualification rules have made it more important than ever for Canadians to plan their path to homeownership well in advance. For financial advisors, this shift presents a unique opportunity to integrate savings strategies that go beyond traditional investment planning. With the introduction of the Tax-Free First Home Savings Account (FHSA), advisors now have a powerful new tool to help first-time home buyers (FTHBs) accelerate their savings and reduce the tax burden tied to one of their most significant financial decisions.

By combining the FHSA with the flexibility of a Tax-Free Savings Account (TFSA), advisors can structure a long-term savings roadmap tailored to a client’s income level, housing goals, and life stage. These accounts are more than just buckets for saving; they are strategy drivers that can determine how quickly and efficiently a client can enter the housing market. Whether your client is 23 or 53, aligning these registered plans with their broader financial goals can turn even the most delayed dreams of homeownership into achievable outcomes.

TFSA and FHSA Can Trigger Smarter Long-Term Homeownership Planning

The rising cost of housing in Canada is forcing clients, especially younger ones, to rethink how and when they can afford a home. As a financial advisor, this presents a valuable opportunity to revisit registered savings strategies that align with both short- and long-term planning goals. With the addition of the First Home Savings Account (FHSA) to the advisor toolkit, there’s never been a better time to help clients leverage account selection as a strategic decision that supports their path to homeownership.

The FHSA combines the best features of an RRSP and a TFSA. When strategically layered into a long-term savings plan, it can become a critical lever for affordability, tax efficiency, and flexibility. The challenge now is to determine the most effective way to deploy and structure contributions between TFSAs and FHSAs based on client income, goals, and purchase time horizon.

Strategic Planning Insights for Financial Advisors

Helping clients achieve homeownership isn’t just about funding a down payment; it’s about choosing the right accounts and investments to build long-term value while managing short-term needs. The addition of the FHSA to Canada’s suite of registered plans gives advisors a fresh way to create flexible, tax-efficient savings strategies tailored to individual goals and timelines. 

Whether clients are actively house-hunting or still years away from buying, how and when they use accounts like the FHSA, TFSA, and RRSP can make a major difference in their purchasing power, tax liability exposure, and eligibility for government benefits. The following planning insights will help you structure layered strategies that adapt to income levels, risk tolerance, and homebuying time horizons, giving your clients a smarter, more confident path to homeownership.

Use FHSA to build a dedicated, tax-efficient down payment strategy

The FHSA offers an annual contribution limit of $8,000 (up to a lifetime maximum of $40,000) with tax-deductible contributions and tax-free withdrawals, provided the funds are used for a qualifying first home. This account is ideal for clients aged 18 and above who haven’t owned a home in the current or previous four calendar years. Contributions can also be carried forward, and unused funds can later be rolled into an RRSP or RRIF without impacting their existing RRSP contribution room. This unique feature makes the FHSA an incredibly flexible planning tool, particularly for clients who are still evaluating their long-term housing plans.

Open early to start the contribution clock

Unlike the TFSA, the FHSA contribution room doesn’t begin accumulating until the account is opened. That means eligible clients, even those unsure about their timeline, should consider opening an FHSA as soon as possible to take advantage of annual room growth. Waiting two or three years to open the account could mean missing out on up to $16,000 in cumulative contribution opportunity. Encourage younger clients, especially those finishing school or early in their careers, to get started with even modest contributions.

Bridge TFSA flexibility with FHSA purpose

TFSAs are unmatched in flexibility, offering tax-free withdrawals and contribution room that is added back in the following calendar year if withdrawn in the previous year. This makes them an ideal complement to the FHSA. For clients uncertain about timing, saving into a TFSA can act as a backup reserve or emergency fund that won’t interfere with longer-term home savings. In cases where cash is limited, TFSA funds can be withdrawn and redirected into an FHSA (as long as FHSA contribution room is available), resulting in an immediate tax deduction. The TFSA’s utility in this scenario becomes part of a two-step planning strategy.

Should TFSA be prioritized over the FHSA?

Clients already saving in TFSAs may assume that they should keep doing so. But once FHSA eligibility is established, it makes sense to prioritize the FHSA over the TFSA, at least until the $40,000 cap is reached. Why? Because FHSA contributions are tax-deductible and withdrawals are tax-free, this offers a double tax advantage. However, the TFSA still plays a role in protecting liquidity and maximizing overall tax-sheltered investment space. The two accounts should be used in tandem, not in competition with each other.

RRSPs and the Home Buyers’ Plan (HBP) still selectively matter

The FHSA now appears more attractive than the RRSP HBP for most first-time buyers, since FHSA withdrawals don’t have to be repaid. However, for those aiming to build a larger down payment, the HBP can still be layered in. A strategic approach might involve maximizing the FHSA and then utilizing any existing RRSP contributions to access up to $60,000 more per person through the Home Buyers’ Plan (HBP). Combined, that could mean up to $120,000 in additional available funds for a couple. Please remind clients that HBP withdrawals must be repaid over 15 years; otherwise, they will be added to their taxable income.

Prioritize account selection based on income and benefit optimization

For clients in lower tax brackets, the TFSA may still offer more long-term value than the RRSP due to its neutrality on government benefits. High-income earners benefit more from RRSP and FHSA deductions. This becomes especially relevant when planning across life stages or accounting for projected tax brackets in retirement. Example: A client earning $120,000 should favour FHSA and RRSP for tax savings today. In contrast, a client earning $45,000 may benefit more from a TFSA to protect future Guaranteed Income Supplement (GIS) or Old Age Security (OAS) eligibility.

Contribute to long-term investment growth while planning for liquidity

Both TFSAs and FHSAs support a wide range of investment account types, including those held at a bank or trust, investment brokerage, or self-directed trading account, enabling clients to segment their investments between cash/GICs, mutual funds, ETFs, stocks, leveraged/margin accounts, and futures contracts. Help clients select investment strategies based on when they plan to use the funds, their risk assessment and their financial capacity to handle risk. If a home purchase is more than five years out, they may consider more aggressive growth strategies inside these accounts. If they’re planning to buy within the next two years, capital preservation becomes more important, making risk-adjusted asset allocation across accounts critical.

Keep an eye out for foreign investment tax liability

For clients holding US dividend-paying stocks, the type of registered account matters more than most realize. While many advisors focus on tax deferral or contribution flexibility, the often-overlooked issue of US withholding tax can quietly erode investment returns, particularly in TFSA and FHSA. According to the Canada–US tax treaty, RRSPs, RRIFs, and similar registered retirement accounts are exempt from the standard 15% withholding tax on US dividends. But that exemption doesn’t extend to TFSAs or FHSAs, where dividend income is fully exposed to unrecoverable US tax drag.

This has significant implications for portfolio construction. For example, if a client holds US equities yielding 2% inside a TFSA or FHSA, the effective yield drops to 1.7% after withholding tax, a 15% reduction in income, with no credit or deduction available. In contrast, holding those same investments inside an RRSP avoids the withholding tax entirely, allowing the client to retain the full dividend yield. Even in non-registered accounts, the tax is at least partially recoverable through the foreign tax credit mechanism.

For advisors, this creates an opportunity to set themselves apart by refining asset location strategies, especially for clients with multi-account portfolios. US dividend-paying investments are generally best placed in RRSPs or RRIFs, while growth-oriented US equities with little or no yield may be more suitable for FHSAs or TFSAs where the withholding tax has minimal impact. Mutual funds and ETFs that hold US equities indirectly, such as Canadian-listed funds that wrap US-listed ETFs, can also add another layer of complexity, sometimes exposing clients to double taxation depending on the fund structure and account type.

With US assets playing an increasingly central role in diversified Canadian portfolios, understanding where and how to hold them is essential. Choosing the wrong account can quietly cost clients thousands in missed income over time. Selecting the right account can help your clients preserve every available dollar for their down payment or their retirement.

Actionable Steps for Advisors

• Identify eligible clients and encourage early opening of FHSA accounts.
• Assess income levels and benefits exposure to optimize account prioritization.
• Use TFSA withdrawals strategically to fund FHSA contributions where applicable.
• Develop multi-account investment plans tailored to client timelines and objectives.
• Combine FHSA and HBP where larger down payments are needed.
• Revisit your FHSA plans annually to ensure alignment with changing life events and market conditions.

Closing the Strategy Gap into Tangible Homeownership Outcomes

When it comes to guiding clients toward homeownership, knowing the rules is no longer enough. Financial advisors who want to lead in today’s market must help clients use every available tax-advantaged account, not as isolated tools, but as integrated strategy drivers. The difference between success and stagnation in a client’s homeownership plan may come down to something as nuanced as the timing of an FHSA opening or in which account their US dividend-paying stocks are held.

The TFSA and FHSA are powerful on their own, but together, they allow for layered strategies that support tax efficiency, investment flexibility, and long-term financial resilience. Whether a client is two years from buying their first home or twenty years from downsizing into retirement, how these accounts are used will shape both their buying power and their financial legacy.

The advisors who help clients understand these layers, when to open, where to contribute, and how to invest, aren’t just helping them buy a home. They’re showing them how to build wealth around homeownership.

Want to deliver real, measurable value to your clients? Partner with nesto mortgage experts to integrate your client’s investment strategy with mortgage planning because their first homeownership needs assessment should start well before their first visit to an open house.

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