Can I withdraw money from my FHSA before closing on a house?

Yes. You can make a qualifying withdrawal before closing if you already have a written agreement to buy or build a qualifying home and meet all the other CRA conditions. You do not have to wait until the purchase closes.

Can I make multiple tax-free withdrawals from my FHSA?

Yes. CRA allows you to withdraw all the property in one payment or through a series of qualifying withdrawals. Each withdrawal must satisfy the applicable qualifying conditions.

Do I have to repay money withdrawn from an FHSA for my first home?

No. A qualifying FHSA withdrawal does not have to be repaid. This differs from the Home Buyers' Plan, which involves repayment requirements for RRSP withdrawals.

Can my spouse and I both withdraw from our own FHSAs to buy one home?

Yes. Both individuals can make qualifying withdrawals from their own FHSAs when buying or building a home together, provided each person independently meets the qualifying-withdrawal conditions.

What happens if I withdraw FHSA money but do not buy the home?

If the withdrawal does not meet CRA's qualifying conditions, it will generally be treated as taxable income for the year received. You may also explore a permitted direct transfer to an RRSP or RRIF, subject to CRA rules and your circumstances.

First Home Savings Account Withdrawal Rules: 7 Mistakes Canadian Buyers Should Avoid

Key Takeaways

A tax-free FHSA withdrawal requires specific eligibility conditions, including a written purchase agreement and Canadian residency.
The 30-day rule, principal-residence intention and Form RC725 are important parts of the withdrawal process.
A non-qualifying withdrawal is generally taxable income, so buyers should confirm their eligibility before requesting payment.

Why FHSA Withdrawal Rules Matter Before Buying a Home

A First Home Savings Account (FHSA) can help Canadians save for a qualifying first home while receiving tax advantages on eligible contributions and investment growth. However, taking money out is not as simple as requesting a bank transfer. The Canada Revenue Agency (CRA) has specific conditions that determine whether a withdrawal remains tax-free.

If you miss an important requirement, the amount withdrawn may have to be reported as taxable income. Here are seven mistakes Canadian buyers should understand before accessing their FHSA savings.

1. Assuming Opening an FHSA Automatically Makes You Eligible to Withdraw

The eligibility test for opening an FHSA is not identical to the test for making a qualifying withdrawal. For a qualifying withdrawal, CRA generally requires that you did not live in a home you owned or jointly owned as your principal residence during the current calendar year before the withdrawal, excluding the 30 days immediately before it, or during the previous four calendar years.

This distinction matters for people whose circumstances have changed since opening their account. Check your eligibility again when you are ready to purchase.

2. Withdrawing Without a Written Purchase Agreement

Having enough savings or receiving mortgage pre-approval does not satisfy the purchase-agreement requirement. You must have a written agreement to buy or build a qualifying home before making the withdrawal. The agreement must specify an acquisition or construction completion date before October 1 of the year following the withdrawal.

For example, if you withdraw FHSA funds in November 2026, the agreement must provide for the home to be acquired or construction completed before October 1, 2027. Do not treat a mortgage application, verbal promise or property search as a replacement for the required written agreement.

3. Ignoring the 30-Day Rule After Acquiring the Property

Some buyers assume they can withdraw FHSA money whenever they want after receiving the property. CRA requires that you must not have acquired the qualifying home more than 30 days before making the withdrawal. In practical terms, withdrawing after the purchase has closed is possible, but the timing matters.

If you have already completed the purchase, check the acquisition date carefully before submitting your withdrawal request. Waiting too long could put the tax-free treatment at risk.

4. Forgetting the Canadian Residency Requirement

A qualifying withdrawal comes with a residency condition. You must be a resident of Canada from the time you make your first qualifying withdrawal until the earlier of acquiring the qualifying home or your death.

This can matter if you are planning an international move around the same time as your purchase. Do not assume that having opened an FHSA while living in Canada is enough. Your residency status during the withdrawal period is also relevant.

5. Planning to Use the Property Only as an Investment

An FHSA qualifying withdrawal is intended to help you acquire a home for use as your principal place of residence. You must occupy, or intend to occupy, the qualifying home as your principal residence within one year after buying or building it.

A property purchased purely as a rental investment or occasional holiday home may not meet this requirement. Buyers should understand the intended-use condition before treating an FHSA withdrawal as tax-free.

6. Forgetting Form RC725

Even if you satisfy the other conditions, the paperwork still matters. You must complete Form RC725, Request to Make a Qualifying Withdrawal from your FHSA, and provide it to your FHSA issuer. The issuer is the financial institution or provider administering your account.

Before requesting payment, confirm the form's details and the institution's processing requirements. Keep a copy of the completed form and withdrawal confirmation with your home-purchase records.

7. Assuming Every Withdrawal Is Tax-Free and the Account Can Stay Open Indefinitely

A withdrawal that does not meet the qualifying conditions is generally included in your income for the year you receive it. Tax withholding may also apply, although the amount withheld can generally be claimed as a credit on your tax return.

There is another deadline buyers should not overlook. After your first qualifying withdrawal, your maximum FHSA participation period ends on December 31 of the following year. You should close all your FHSAs by that deadline.

A qualifying withdrawal does not need to be repaid. You can withdraw all the property in one payment or through several qualifying withdrawals, provided you meet the conditions.

TwikUp's Perspective

The FHSA is most valuable when its tax benefits are coordinated with the actual home-buying process. Buyers often concentrate on the down payment and closing date, but the withdrawal itself deserves a place on the purchase checklist.

Before asking your provider to release the money, match the purchase agreement, acquisition date, residency status and intended use of the property against CRA's conditions. Also consider where you will keep the withdrawn funds while preparing for closing. Our guide, Canadian Bank Failure Explained: How Much of Your Money Is Actually Protected?, explains how CDIC protection applies to eligible deposits and why account type and institution matter.

Keep your RC725 paperwork and transaction records together, and make sure the money is accessible when your home purchase is ready to close. A little preparation before the withdrawal can help prevent an avoidable tax surprise when your attention is already on moving into your new home.

Disclaimer

This article is for general educational purposes only and is not personalized tax, legal or financial advice. FHSA eligibility and withdrawal treatment depend on individual circumstances. Review current CRA guidance or consult a qualified tax professional before making a withdrawal.

Sources

Canada Revenue Agency