FHSA vs RRSP Home Buyers' Plan: which one should you use?

Two federal programs help first-time buyers fund a down payment with tax benefits: the First Home Savings Account (FHSA) and the RRSP Home Buyers' Plan (HBP). They work differently, and you can use both for the same home.

The short version: the FHSA gives you a tax deduction going in and tax-free withdrawals with nothing to repay. The HBP lets you borrow up to $60,000 from your own RRSP and repay it over 15 years.

How the FHSA works

The FHSA works like an RRSP on the way in and a TFSA on the way out. Contributions are tax-deductible, growth is tax-free, and if you buy a qualifying first home, you withdraw the money tax-free and with nothing to repay.

• Limits: you can contribute up to $8,000 a year, to a lifetime maximum of $40,000. In your first year your room is $8,000, and each later year adds $8,000 as long as you stay within the limit.
• Carry-forward: unused annual room can be carried forward within limits.
• RRSP transfers: you can move money from an RRSP into an FHSA, but the transfer is not deductible.
• First-time buyer status: generally, you must not have lived in a home that you or your spouse or partner owned in the current year or the previous four calendar years.
• Over-contributing: amounts above your room are taxed, and they reduce next year's room.

How the Home Buyers' Plan works

The HBP lets you withdraw up to $60,000 from your RRSP without tax to buy or build your first home.

• Repayment: you repay it to your own RRSP over 15 years. Amounts you do not repay in a year are added to your income. For first withdrawals made from 2026 to 2028, repayment starts in the fifth year after the withdrawal.
• Conditions: you must be a Canadian resident, have a written agreement to buy or build a home, and intend to live in it as your principal residence within one year. A pre-approval is not enough.
• Timing: if you make an RRSP contribution shortly before an HBP withdrawal, special rules can affect whether it is deductible, in particular for contributions made within the 89 days before the withdrawal. Plan the timing and check with the CRA or an accountant.
• First-time buyer test: the same four-year look-back applies, including your spouse or partner's home.

FHSA versus HBP at a glance

• Repayment: FHSA none. HBP over 15 years.
• Tax deduction: FHSA yes on contributions. HBP none (it is your RRSP money, which was already deducted).
• Maximum: FHSA $40,000. HBP $60,000.
• Source of money: FHSA new contributions. HBP existing RRSP savings.

Example

One buyer who uses both has up to $40,000 from the FHSA and $60,000 from the HBP, for $100,000 toward a down payment. A couple could reach $200,000 between them.

Which first?

The FHSA has no repayment, so many advisors suggest filling it first if you can. The HBP is useful if you already have RRSP savings. The FHSA deduction can also reduce your tax bill each year, and you can carry it forward to a high-income year.

How to use them well

• Open an FHSA as soon as you qualify, even with a small amount, since the first deposit starts your room.
• Use the HBP only if repaying it will not strain your budget, since a missed payment becomes taxable income.
• Keep the written agreement and paperwork the CRA requires, such as Form T1036 for the HBP.

Rules, limits and eligibility can change, so confirm them with the Canada Revenue Agency before you rely on them. A financial advisor can help you plan the order for your situation.

Sources: CRA: First Home Savings Account, CRA: How to participate in the Home Buyers' Plan.