If you are planning and dreaming about buying your first home, you are probably aware that two years ago, the federal government rolled out the First Home Savings Account (FHSA), a registered plan which allows a first-time homebuyer to save to buy or build a qualifying first home tax-free.
The FHSA allows you to contribute up to $8,000 per year, with a lifetime contribution limit of $40,000. Contributions are tax-deductible, similar to an RRSP, and withdrawals for a qualifying home purchase are tax-free, similar to a TFSA.
One question many first-time buyers have is whether to invest their FHSA contributions in equities (stocks) for potentially higher returns. While equities have historically provided better long-term returns than conservative investments, they also come with more volatility.
If your timeline to purchase is short (1-2 years), keeping your FHSA in safer investments like high-interest savings accounts or GICs may be wise to protect your down payment. If your timeline is longer (5+ years), a diversified portfolio including equities could help your down payment grow faster.
Consider your risk tolerance and timeline carefully, and consult with a financial advisor to determine the best strategy for your situation.