If you're saving for a first home in Canada, you have three registered accounts to choose from: the FHSA, the TFSA and the RRSP, through the Home Buyers' Plan. The short answer for most people is to fill the FHSA first, use the TFSA for anything beyond that, and treat the RRSP Home Buyers' Plan as a top-up rather than a starting point.
Side by side
| FHSA | TFSA | RRSP (Home Buyers' Plan) | |
|---|---|---|---|
| Contributions deductible? | Yes | No | Yes |
| Growth taxed? | No | No | Not while inside |
| Home withdrawal taxed? | No | No | No, if repaid |
| Must repay? | No | No | Yes, over 15 years |
| Annual room | $8,000 | $7,000 | 18% of earned income, to an annual max |
| Max for a home | $40,000 + growth | Whatever's in it | $60,000 per person |
| Room returns after withdrawal? | No | Yes, next January | Only by repaying |
| If you don't buy | Move to RRSP tax-free | Use for anything | Stays as retirement savings |
Why the FHSA comes first
It's the only account with a deduction going in and a tax-free withdrawal coming out, with nothing to repay. A dollar in your FHSA is worth more toward a home than a dollar in either other account. It's also the only one with a use-it-or-lose-it element: carry-forward is capped at $8,000, so room you skip for two years can't all be used later.
Where the TFSA fits
The TFSA has no deduction, but it's completely flexible. Money comes out tax-free for any reason, and the room comes back the following January. That makes it the right place for:
- Savings beyond the FHSA's $8,000 a year
- Your emergency fund, which you shouldn't drain for a down payment
- Your FHSA tax refunds, so they keep compounding
The RRSP Home Buyers' Plan
The Home Buyers' Plan lets you withdraw up to $60,000 from your RRSP for a first home without paying tax, but it's a loan to yourself. You have to repay it to your RRSP over 15 years, and any year's required repayment you miss is added to your income. It works best if:
- You already have significant RRSP savings, for example from a workplace plan
- You've maxed your FHSA and need a larger down payment
- You're comfortable with a repayment schedule on top of a new mortgage
Watch the 90-day rule. RRSP contributions have to sit in the account for at least 90 days before you can withdraw them under the Home Buyers' Plan, or they lose their deduction. Don't make a last-minute RRSP contribution just before closing.
Stacking all three: a couple's example
A couple who both qualify, and who each max their FHSA over five years and also use the Home Buyers' Plan, could put together:
| Source | Per person | Couple |
|---|---|---|
| FHSA contributions | $40,000 | $80,000 |
| RRSP Home Buyers' Plan | $60,000 | $120,000 |
| TFSA savings | Varies | Varies |
| Total before growth and TFSA | $100,000 | $200,000 |
Most couples won't get close to this, but it shows how much tax-advantaged room is available. Add FHSA growth and TFSA savings on top.
A simple order of operations
- Open an FHSA now to start the room clock, even with a small deposit.
- Contribute up to $8,000 a year to the FHSA.
- Put the tax refund in your TFSA.
- Save anything extra in the TFSA.
- If you have existing RRSP money, plan to use the Home Buyers' Plan as a top-up, or transfer some to your FHSA. That uses FHSA room and gives no new deduction, so it only makes sense if you don't have the cash to fill the FHSA otherwise.
Frequently asked questions
Should I move my TFSA money into an FHSA?
Often, yes. Moving up to your available FHSA room from a TFSA into an FHSA earns you a deduction you didn't get on the TFSA. The TFSA room comes back the following January.
Is the FHSA better than the RRSP for a house?
For a first home, yes. Both give a deduction, but FHSA withdrawals never have to be repaid, while Home Buyers' Plan withdrawals do.
Can I use the FHSA and HBP for the same purchase?
Yes. Since 2023 you can make a qualifying FHSA withdrawal and a Home Buyers' Plan withdrawal for the same qualifying home.
Sources
- Canada Revenue Agency, First Home Savings Account (FHSA)
- Canada Revenue Agency, What is the Home Buyers' Plan (HBP)?