Introduction
Buying your first home in Canada can feel like climbing a financial mountain. With rising housing prices, mortgage rules, and hefty down payments, many Canadians — especially first-time buyers — wonder how they’ll ever make it work. The good news? The government has created powerful tax-advantaged programs that can help you save, grow, and access money for your first home more efficiently than simply parking your cash in a savings account.
Two of the most effective tools are the Registered Retirement Savings Plan (RRSP) and the First Home Savings Account (FHSA). Used separately, they’re strong. Used together, they’re a game-changing hack that can save you thousands in taxes and accelerate your journey to home ownership.
In this comprehensive guide, I’ll cover:
What RRSP and FHSA are (and how they work)
The Home Buyers’ Plan (HBP) through RRSP
The rules and advantages of FHSA
How to combine RRSP + FHSA for maximum benefit
Risks, repayment rules, and pitfalls to avoid
Real-life examples and math scenarios
A step-by-step timeline for planning your purchase
Tips to rebuild your accounts after buying
By the end, you’ll understand how to use both RRSP and FHSA like a pro to get closer to your first home in Canada.
RRSP & FHSA: Quick Primer
RRSP (Registered Retirement Savings Plan)
Designed primarily for retirement savings.
Contributions are tax-deductible, reducing your taxable income.
Investments grow tax-deferred (not taxed until withdrawn).
Withdrawals are taxable, except under special programs like the Home Buyers’ Plan (HBP).
FHSA (First Home Savings Account)
Introduced in 2023, specifically to help Canadians buy their first home.
Annual contribution limit: $8,000 per year.
Lifetime limit: $40,000.
Contributions are tax-deductible (like RRSP).
Growth inside the account is tax-free (like TFSA).
Withdrawals for a qualifying first home are tax-free.
If you don’t end up buying a home, you can transfer FHSA funds into your RRSP or RRIF without tax penalties.
Key Difference vs TFSA
Unlike TFSA, FHSA is laser-focused on first-time home buyers. While TFSA gives flexibility, FHSA offers the best of both worlds: tax deduction now and tax-free withdrawals later, provided you use it for a qualifying home purchase.
RRSP & the Home Buyers’ Plan (HBP)
The RRSP has been the go-to tool for first-time buyers for decades, thanks to the Home Buyers’ Plan. Let’s break it down.
How the HBP Works
You can withdraw up to $35,000 from your RRSP to use as a down payment, tax-free.
Couples buying together can withdraw up to $70,000 combined.
You must repay the withdrawal over 15 years, starting the second year after withdrawal.
If you miss a repayment in a given year, that portion is added to your taxable income.
RRSP contributions used for HBP must remain in your RRSP at least 90 days before withdrawal.
Strategy with RRSP
Contribute to your RRSP while saving for a home.
Get a tax refund from the contribution.
Use that refund to boost your down payment or contribute to your FHSA.
Withdraw up to $35,000 under HBP when you’re ready to buy.
This way, you’ve used the RRSP both to lower your taxes and to access a lump sum for your first home.
FHSA: The New Power Tool for First-Time Buyers
The FHSA is arguably the biggest gift Ottawa has given young Canadians in decades. It combines the tax perks of RRSP with the tax-free withdrawal advantage of TFSA.
FHSA Key Features
Tax deduction upfront: Like RRSP, your contributions reduce taxable income.
Tax-free withdrawals for first home: Like TFSA, you won’t pay tax on qualifying withdrawals.
Annual contribution limit: $8,000.
Lifetime contribution limit: $40,000.
Carry forward: If you don’t max out one year, unused room (up to $8,000) carries forward.
Timeline: You can keep an FHSA open for up to 15 years, or until you buy your first home.
Why FHSA is Better Than TFSA for First-Time Buyers
With TFSA, contributions are not tax-deductible. With FHSA, they are.
FHSA is designed specifically for first-time home buyers.
You get double tax benefits: deduction now, tax-free withdrawal later.
The Ultimate Hack: Combining RRSP + FHSA
Here’s where it gets exciting. You can use both accounts together, and CRA allows it.
Step 1: Max FHSA Contributions
Contribute $8,000 annually into your FHSA (up to $40,000 lifetime).
Get a tax deduction each year (just like RRSP).
Let the funds grow tax-free.
Step 2: Contribute to RRSP (and Prepare for HBP)
Continue contributing to RRSP as well.
Take advantage of tax refunds.
Build up to $35,000 eligible for withdrawal under HBP.
Step 3: Withdraw from Both
When buying:
Withdraw up to $40,000 from FHSA (no repayment required).
Withdraw up to $35,000 from RRSP under HBP (repay over 15 years).
That’s $75,000 total as a single buyer.
For couples, that’s up to $150,000 combined.
Example Scenarios
Scenario A: Single Buyer
Contributes $8,000 annually to FHSA for 5 years = $40,000.
Invests wisely, grows to $50,000.
Contributes $20,000 to RRSP, gets $6,000 in tax refunds.
Withdraws $35,000 under HBP.
Total funds for down payment = $50,000 (FHSA) + $35,000 (RRSP) + $6,000 refund = $91,000.
Scenario B: Couple
Each contributes full $40,000 FHSA.
Each has $35,000 RRSP eligible.
Total combined: $150,000.
Add investment growth and tax refunds — their down payment pool could easily exceed $170,000.
Pitfalls & Risks
HBP Repayments: Forgetting repayments = taxable income.
Contribution Limits: Over-contributing to FHSA or RRSP leads to penalties.
Market Volatility: If invested aggressively, your savings may shrink just before withdrawal.
Eligibility Rules: Must be a first-time home buyer under CRA definition.
Step-by-Step Timeline
3–5 Years Before Buying
Open FHSA, max contributions.
Contribute to RRSP.
Invest funds wisely.
1–2 Years Before Buying
Shift to safer investments.
Plan withdrawal amounts (FHSA vs RRSP).
Year of Purchase
Withdraw FHSA funds (no repayment).
Withdraw RRSP under HBP (repay over 15 years).
Combine for down payment.
After Purchase
Repay HBP annually.
Rebuild FHSA/TFSA for next financial goal.
Final Thoughts
For Canadian first-time buyers, combining FHSA + RRSP/HBP is the most tax-efficient, government-supported strategy to maximize your down payment power. FHSA gives you free money through tax deductions and tax-free withdrawals, while RRSP lets you leverage the Home Buyers’ Plan for even more savings. Together, they create a legal, strategic, and practical hack to get into your first home sooner.
If you’re serious about buying your first home, don’t leave money on the table. Start contributing to both accounts now — and let tax rules work in your favour.