Two Paths to a Down Payment
Canada offers two tax-advantaged ways to save for your first home: the First Home Savings Account (FHSA) and the RRSP Home Buyers' Plan (HBP). Both help you buy a home with less tax pain, but they work very differently. Here's how to decide which is right for you, or whether to use both.
The RRSP Home Buyers' Plan
The HBP lets you withdraw up to $60,000 from your RRSP (as of 2024) tax-free to use toward a first home purchase. Sounds great, but there's a catch. You have to pay it back over 15 years. If you miss a repayment in a given year, that amount gets added to your taxable income.
- Limit: $60,000 per person ($120,000 per couple)
- Repayment: Required over 15 years
- Source: Must come from existing RRSP savings
The FHSA
The FHSA was built specifically for first-time buyers. Contributions are tax-deductible, growth is sheltered, and qualifying withdrawals are completely tax-free, no repayment required.
- Limit: $40,000 lifetime ($8,000/year)
- Repayment: None
- Source: Fresh contributions into a new account
Key Differences at a Glance
| Feature | FHSA | RRSP HBP | |---|---|---| | Tax deduction on contribution | Yes | Yes (when contributed to RRSP) | | Tax-free withdrawal | Yes | Yes (but must repay) | | Repayment required | No | Yes, over 15 years | | Max withdrawal | $40,000 | $60,000 | | Reduces RRSP room | No | No |
Which Should You Choose?
Choose the FHSA first if you're starting from scratch. No repayment obligation makes it cleaner and less risky. If you've already been contributing to an RRSP for years, the HBP lets you tap into that larger pool.
The best strategy for most people: use both. Stack your FHSA ($40,000 max) with an HBP withdrawal ($60,000 max) for a combined $100,000 per person, potentially $200,000 for a couple, toward a down payment.
Ottawa Perspective
In Ottawa's competitive housing market, having a larger down payment can mean the difference between qualifying for a home in Kanata or being priced out of a neighbourhood entirely. Many Ottawa buyers are now combining both tools to clear the 20% down payment threshold and avoid CMHC mortgage insurance.
Bottom Line
For newcomers or those early in their careers, prioritize the FHSA, no payback required makes it lower risk. If you have existing RRSP savings, the HBP is a powerful complement. Used together, they're the strongest down payment strategy available to Canadians.
