📖 FHSA vs RRSP Home Buyers' Plan

Two programs, one down payment

Canada gives first-time buyers two separate tax-advantaged ways to build a down payment, and they stack. The First Home Savings Account (FHSA) lets you contribute up to $8,000 a year to a lifetime maximum of $40,000; contributions are tax-deductible and withdrawals for a qualifying first home are completely tax-free — the only account in Canada where money is sheltered on the way in and on the way out. The RRSP Home Buyers' Plan (HBP) lets you withdraw up to $60,000 from your RRSP tax-free to buy a qualifying first home — but that one is a loan from your future self, repayable over 15 years. Used together: $40,000 + $60,000 = $100,000 per person, or $200,000 for a couple where both partners qualify. That is a down payment strategy, not a trivia fact — on a $650,000 Ontario home, $100,000 down is the difference between a 4.00% insurance premium tier and a cheaper one, or between insured and uninsured entirely as you approach 20%.

Side by side

The repayment difference is the big one

An FHSA dollar used for a home is gone from your accounts but costs you nothing later. An HBP dollar comes with a 15-year obligation: repayments begin the second calendar year after the withdrawal year, at 1/15 of the balance per year — $4,000 a year on a full $60,000 withdrawal, every year, on top of your new mortgage payment, property tax, and everything else homeownership adds. Miss an instalment and that amount is added to your taxable income for the year. None of this makes the HBP a bad deal — a tax-free $60,000 at the moment of purchase is powerful — but it means the HBP portion of your down payment carries a future monthly cost the FHSA portion does not. The Home Buyers' Plan calculator prints the exact 15-year repayment schedule for any withdrawal amount, so you can see the obligation before you sign up for it.

Worked example: how a couple actually reaches $200,000

Take two partners who each open an FHSA in the same year and contribute the $8,000 maximum annually. After five years each has contributed $40,000 — the lifetime cap — and each has also accumulated five years of tax deductions to claim (in the contribution year or a later, higher-income one; at a 30% marginal rate, a $40,000 deduction is worth about $12,000 of refunds per person, refunds many buyers recycle straight back into the down payment fund). Separately, each has $60,000 sitting in an RRSP — built from years of ordinary contributions, not a last-minute deposit, because of the 90-day rule. On purchase day the stack is $40,000 + $40,000 from the FHSAs and $60,000 + $60,000 under the HBP: $200,000, of which $80,000 (the FHSA half) never has to be repaid and $120,000 (the HBP half) goes back into their RRSPs at $8,000 a year combined over 15 years. That repayment is real money in a new homeowner's budget — roughly $667 a month between them — which is why the plan only works if the mortgage payment was budgeted with the repayment already in it.

Three mistakes that cost people money

Waiting to open the FHSA. The account's room grows by $8,000 a year only from the year you open it, and unused room carries forward — but only within the account's 15-year life. Opening it in a year when you can contribute nothing still banks the room. Claiming the FHSA deduction in a low-income year. The deduction never expires while the account is open; carrying it into a higher-bracket year can make the same $8,000 worth hundreds more. Dumping money into the RRSP at the last minute for the HBP. Contributions made within 90 days of the withdrawal cannot be withdrawn under the plan — the seasoning rule exists precisely to stop that move, and it catches rushed buyers every spring. None of these are obscure: they are the three most common ways the stack underperforms the brochure.

Which do you fund first?

In general educational terms, most comparisons land in the same place: open and fund the FHSA first. Three reasons. First, FHSA room only starts accumulating once the account exists — every year without an account is $8,000 of room you can never fully recover, since unused room carries forward only from the year you open it. Second, the FHSA's tax treatment is strictly better: deductible in, tax-free out, no repayment. Third, if you never buy, unused FHSA value can move into your RRSP without using RRSP room — there is almost no downside scenario. The HBP then works on money already inside your RRSP (remember the 90-day rule: last-minute RRSP contributions cannot be withdrawn under the plan right away). One sequencing detail worth knowing: FHSA deductions do not have to be claimed in the year you contribute — carrying the deduction forward to a higher-income year makes it worth more, which matters for buyers whose incomes are rising early in their careers. This is general information about how the programs work, not a recommendation for your situation; the FHSA calculator will show your own room, refund, and growth numbers, and the first-time home buyer hub puts both programs in the full save-qualify-buy sequence.