Short answer: for most first time buyers, the FHSA is the better first choice because the money you take out for a qualifying home doesn’t have to be paid back. The RRSP Home Buyers’ Plan lets you borrow more from your RRSP, but you have to repay it over 15 years.
The good news is you don’t always have to pick. The Canada Revenue Agency says you can use both for the same qualifying home if you meet the conditions of each.
We’re a real estate team, not financial planners, so treat this as a starting point for a conversation with your advisor or lender. Here’s how we explain it to buyers in Kemptville and the Ottawa area.
While you’re building your down payment, it helps to see what’s out there. Browse the homes we have for sale right now.
The FHSA in plain terms
The First Home Savings Account is a registered account built only for buying a first home.
- You can contribute up to $8,000 a year, with a lifetime limit of $40,000.
- Contributions are generally tax deductible, a bit like an RRSP.
- A qualifying withdrawal to buy a first home is tax free, and you don’t pay it back.
- Unused room can carry forward, within the CRA’s rules.
For buyers who open one early, this is the cleanest tool available. Money goes in with a deduction and comes out tax free for the house.
The RRSP Home Buyers’ Plan in plain terms
The Home Buyers’ Plan, or HBP, lets you withdraw from your own RRSP to buy or build a qualifying home.
- The current withdrawal limit is $60,000 per person.
- Withdrawals must happen in the same calendar year as your first one, plus January of the next year.
- You repay the amount to your RRSP over 15 years. Missed repayments get added to your income.
- For first withdrawals made from January 1, 2022 through December 31, 2028, the CRA has deferred the start of repayments to the fifth year after the year of the withdrawal.
So the HBP is a loan from your future retirement self. A useful one, but a loan.
FHSA vs RRSP Home Buyers’ Plan side by side
Here’s the comparison in short points:
- Pay it back? FHSA: no. HBP: yes, over 15 years.
- Limit: FHSA: $40,000 lifetime. HBP: $60,000 per person.
- Tax deduction on the way in: both, generally.
- Good if: FHSA suits buyers who can start saving now. HBP suits buyers who already have RRSP savings.
- Use together? Yes, if you meet the conditions of both.
Why couples often get the most out of this
Both plans are per person. Two first time buyers buying together can each use their own FHSA and their own HBP room.
That’s why we tell couples to sit down with their numbers early. Two accounts opened a couple of years before you buy can make a real difference to your down payment.
Things buyers get wrong
Opening the FHSA too late
Participation room only starts once you open the account. If you think you’ll buy in a few years, opening it now starts the clock, even with a small deposit.
Forgetting the HBP repayment
Repayments feel far away when you’re excited about a house. Build them into your monthly budget anyway, alongside property tax, utilities and, on rural homes, well and septic upkeep.
Moving money too close to closing
Lenders want to see where your down payment came from. Big transfers between accounts right before closing can mean more paperwork, so plan withdrawals with your lender and advisor.
Assuming the first time buyer rules match
The FHSA, the HBP and Ontario’s land transfer tax refund each define a first time buyer differently. Qualifying for one doesn’t mean you qualify for the others. We explain the provincial side in our post on the land transfer tax refund.
A walk through how timing can work
Here’s a general picture, not advice for your situation. A buyer opens an FHSA, contributes for a few years, and also has RRSP savings from work.
When they find a home and their offer goes firm, they talk to their advisor about the order of withdrawals. The FHSA withdrawal and the HBP withdrawal are requested with the right CRA forms, and the money lands in time for the lawyer’s closing deadline.
Then the HBP repayment schedule starts later, and the FHSA is done. The key is that none of it is rushed in the last week before closing.
How this fits with Ontario costs on closing
Neither plan covers your closing costs automatically. You still need cash for land transfer tax, legal fees, title insurance and adjustments.
If both plans go entirely into the down payment, make sure you’ve set aside the rest separately. We’ve seen tight closings where the down payment was perfect and the legal bill wasn’t planned for.
On a rural purchase, add the well water test, septic inspection and possibly a survey to that list.
Questions to bring to your bank or advisor
- How much FHSA contribution room do I have this year, and how much carries forward?
- How much RRSP room do I have, and how much is already eligible for the Home Buyers’ Plan?
- How long do RRSP contributions need to sit before I can withdraw them under the plan?
- When would my Home Buyers’ Plan repayments start, and how much would they be each year?
- Could I use both programs for the same purchase?
Bring your latest notice of assessment from the CRA, which shows your RRSP room.
Our opinion
If you’re two or more years away from buying and you qualify, open an FHSA now. It’s the most generous tool first time buyers have, and you don’t owe it back.
If you already have healthy RRSP savings and want to buy sooner, the HBP can bridge the gap. Just treat the repayment like any other monthly bill.
If you want to see how a bigger down payment changes your monthly payment, try our mortgage calculator. Then talk to your lender about the right mix for your situation.
What to bring to your lender or advisor
When you book that conversation, a little prep makes it far more useful:
- Your FHSA and RRSP statements and current balances.
- Your CRA account summary showing contribution room.
- A rough idea of your timeline and target price range.
- Any gift or family help you expect, so it’s planned and documented.
With that in hand, they can tell you how much to draw from each account and when. You can find more about our team on the homepage.
FAQ
Can I use both the FHSA and the Home Buyers’ Plan?
Yes. The CRA allows a qualifying FHSA withdrawal and an HBP withdrawal for the same qualifying home, as long as you meet the conditions of each.
How much can I put in an FHSA?
Up to $8,000 a year, with a lifetime limit of $40,000. Unused room can carry forward under the CRA’s rules.
How much can I withdraw under the Home Buyers’ Plan?
The current limit is $60,000 per person.
Do I have to pay back my FHSA?
No. A qualifying withdrawal to buy a first home is tax free and isn’t repaid.
When do HBP repayments start?
Normally in the second year after the year of your first withdrawal. For first withdrawals from 2022 through 2028, the CRA has deferred the start to the fifth year after the year of the withdrawal.
What happens if I miss an HBP repayment?
The amount you should have repaid for that year is added to your taxable income.
Can my partner and I each open an FHSA?
Yes. Each eligible person has their own FHSA and their own HBP limit.
Is the FHSA only for first time buyers?
Yes. You have to meet the CRA’s first time home buyer definition to open one and make a qualifying withdrawal.
Does it matter which plan I use first?
It can, for tax and timing reasons. That’s a question for your advisor, since it depends on your income and savings.
Can I use these plans for a rural home or acreage?
Generally yes, if it’s a qualifying home you’ll live in. Confirm the details with your advisor and lender before you buy.