FHSA vs RRSP Home Buyers' Plan — which for your first home?

The FHSA at a glance

Launched in April 2023, the First Home Savings Account (FHSA) is a registered account built exclusively for first-time buyers. It merges the best features of an RRSP and a TFSA:

• Tax deduction on every dollar contributed — just like an RRSP.
• Completely tax-free withdrawal for a qualifying first home purchase — just like a TFSA.
• Annual limit: $8,000 per year. Unused room carries forward by up to $8,000 (so a maximum of $16,000 in any single year if you under-contributed the prior year).
• Lifetime limit: $40,000 per person.
• Maximum account duration: 15 years from opening. After that, the balance must transfer to your RRSP or RRIF — tax-free and without affecting your existing RRSP room.

Eligibility: you must be at least 18, a Canadian resident, and not have lived in a home you owned (or that your spouse or common-law partner owned) as your principal residence during the current or preceding four calendar years.

The RRSP Home Buyers' Plan — a zero-interest loan to yourself

The RRSP Home Buyers' Plan (HBP) has existed since 1992. It lets you withdraw funds from your RRSP to buy or build a qualifying first home without triggering immediate tax — but unlike the FHSA, the HBP is not a tax-free withdrawal. It is an interest-free loan you make to yourself that you must repay over time.

• Withdrawal limit: $60,000 per person (increased from $35,000 in 2024).
• Repayment period: 15 years, with a 2-year grace period after the year of withdrawal before annual repayments must begin.
• If not repaid: the required annual instalment (1/15 of the total) is added to your taxable income for that year.
• Mandatory waiting period: RRSP funds must have been on deposit for at least 90 days before withdrawal, or the original contribution is not deductible in the year it was made.

The HBP does not generate any additional tax advantage on the withdrawal itself — you already received the deduction when you contributed to the RRSP. But it lets you access accumulated savings without immediate tax, provided you stick to the 15-year repayment plan.

Side-by-side comparison: FHSA vs HBP

Can you use both the FHSA and the HBP?

Yes — absolutely. The FHSA and the HBP are fully stackable for the same qualifying purchase. There is no rule that makes them mutually exclusive. For a couple, this unlocks a potential of:

• $80,000 in FHSA funds (2 × $40,000) + tax-free investment growth
• $120,000 via the HBP (2 × $60,000)
• Theoretical total: $200,000 + growth — with no immediate tax on withdrawal

You can layer on top of this any TFSA savings as well — see our guide on TFSA vs FHSA for a first home for how to fit all three together.

Concrete tax advantage: FHSA at 40% marginal rate

Here is what a maxed-out FHSA is worth to someone in the 40% marginal tax bracket:

• Total contributions: $40,000 over 5 years ($8,000/year)
• Immediate tax savings: $16,000 (40% × $40,000)
• Investment growth at 6%/year over 5 years: $40,000 → approximately $53,500
• Withdrawal for purchase: 100% tax-free
• Estimated total benefit vs. unregistered account: ~$29,500

The FHSA is especially powerful if you are in a high tax bracket now and plan to buy in 3 to 15 years.

HBP advantage: accessing an existing RRSP

The HBP shines when you already have a substantial RRSP balance. It lets you unlock up to $60,000 with no immediate tax — as long as you follow the 15-year repayment schedule. Think of it as a zero-interest internal mortgage loan.

One caveat: funds must sit in your RRSP for at least 90 days before withdrawal to preserve the deductibility of the original contribution. If your RRSP is thin right now, rapidly contributing funds to meet the 90-day rule offers limited benefit since there is little time for growth. That is precisely why opening an FHSA as early as possible is the top priority for younger first-time buyers — giving you the full 5-year runway to max out the $40,000 lifetime room.

Best strategy by profile

Profile 1 — Buying in 5–10 years, average income

Priority: open and max your FHSA first. Contribute $8,000 a year and invest inside the account in diversified ETFs. Supplement with your TFSA for extra flexibility. Then tap the HBP if you have an existing RRSP balance at purchase time.

Profile 2 — Large RRSP, buying within 3 years

If you're buying soon and have little time to build up an FHSA, the HBP may be your primary tool. Still open an FHSA now: even 1–2 years of contributions at $8,000 earns you a tax deduction plus a tax-free withdrawal when you close the deal.

Profile 3 — Couple buying together

Each partner opens their own FHSA. Room does not transfer between spouses, but each eligible person gets their own $40,000 cap. Stack both HBPs on top if you each have an RRSP. This is the strategy that maximizes available down payment.

Profile 4 — Lower income, lower tax bracket

The FHSA deduction is worth less if you are in the 20% bracket. Consider deferring the deduction to a higher-income year — this is permitted with the FHSA just like with an RRSP. Contribute now, claim the deduction later when it saves you more.

Deadlines and rules to know

• FHSA — account closure: you must close the account by December 31 of the year after your first qualifying withdrawal. If you never buy, transfer the balance to your RRSP or RRIF by year 15 with no tax and no impact on RRSP room.
• FHSA — carryforward room: unused annual room (up to $8,000) carries forward to the next year — maximum combined contribution of $16,000 in any single year.
• HBP — 90-day rule: RRSP funds must have been on deposit for at least 90 days before withdrawal or the original contribution is not deductible in the year it was made.
• HBP — repayment start: repayments begin in the second year after the year of withdrawal. Each annual instalment = 1/15 of the amount withdrawn. Any instalment not repaid is added to taxable income that year.
• Qualifying home (both programs): must be located in Canada, acquired or built before October 1 of the year following the withdrawal, and must become your principal place of residence within one year of acquisition.

What if the purchase falls through?

The FHSA is very forgiving here: simply transfer the balance to your RRSP or RRIF tax-free without touching your existing RRSP contribution room. You keep every deduction you already claimed and the sheltered growth — nothing is lost.

The HBP is less flexible: if you withdrew funds and the purchase does not go through, you generally need to return the amounts to your RRSP before the end of the year (or by October 1 of the following year under certain conditions), or the full amount becomes taxable income.

Frequently asked questions