FHSA vs RRSP Home Buyers' Plan: which is better for your down payment?

If you’re saving for your first home in Canada, you’ve probably run into these two options: the First Home Savings Account (FHSA) and the RRSP Home Buyers’ Plan (HBP). They both give you a tax deduction on contributions. They both let you pull money out for a home purchase. On the surface, they look like they do the same thing.

They don’t. The way the money comes out is completely different, and that difference will cost you (or save you) thousands of dollars depending on which one you lean on. This isn’t financial advice. I’m sharing what I’ve learned from going through the home-buying process myself and spending way too many hours reading CRA documents. Contribution limits, rules, and eligibility can change, so double-check anything that affects your decisions.

The core difference in one paragraph

Both accounts give you a tax deduction when you contribute. The split happens at withdrawal. When you take money out of your FHSA to buy a home, it’s yours. Free and clear. No tax, no repayment, no strings. When you use the RRSP Home Buyers’ Plan, you’re borrowing from yourself. The government lets you pull the money out tax-free, but you have to put it all back over the next 15 years. If you miss a repayment, that year’s amount gets added to your taxable income.

That repayment requirement is the thing that catches people off guard.

How each one works

The FHSA

The First Home Savings Account launched in April 2023. You can contribute up to $8,000 per year, with a lifetime maximum of $40,000. Contributions are tax-deductible, just like an RRSP. When you withdraw to buy a qualifying first home, everything comes out tax-free, contributions and investment growth. No repayment.

If you don’t max out your $8,000 in a given year, you can carry forward up to $8,000 of unused room. But room only starts accumulating after you open the account. So even if you’re not ready to contribute much right now, opening one starts the clock.

The account stays open for up to 15 years. If you don’t end up buying a home, you can transfer the balance into your RRSP without using up your RRSP contribution room. The money isn’t lost. It just shifts to retirement.

The RRSP Home Buyers’ Plan

The HBP has been around since 1992. It lets first-time home buyers withdraw up to $60,000 from their RRSP, tax-free, to put toward a home purchase. For a couple where both people qualify, that’s up to $120,000 combined.

The catch: you have to repay the full amount over 15 years. Repayments start the second year after your withdrawal (previously it was the fifth year for earlier withdrawals, but the government changed this). Each year, at least 1/15 of the total must go back into your RRSP. If you don’t make a repayment, the CRA adds that year’s required amount to your taxable income.

So it’s not really a withdrawal. It’s an interest-free loan from your own RRSP, with mandatory repayments that reduce your future investing capacity.

Side-by-side comparison

Feature	FHSA	RRSP Home Buyers’ Plan
Tax deduction on contributions	Yes	Yes
Tax-free withdrawal for home purchase	Yes	Yes
Must repay after withdrawal	No	Yes, over 15 years
Annual contribution limit	$8,000	No annual limit (RRSP limit applies)
Lifetime contribution cap	$40,000	No lifetime cap (RRSP limit applies)
Maximum withdrawal for home purchase	Full balance (contributions + growth)	$60,000 per person
Investment growth included in withdrawal	Yes, tax-free	Yes, but only up to $60,000 total
Unused room carry-forward	Up to $8,000/year (after account is open)	N/A (RRSP room carries forward automatically)
What happens if you don’t buy	Transfer to RRSP (no room used)	Money stays in RRSP as normal
Penalty for missed repayment	N/A	Missed amount becomes taxable income
Available since	2023	1992

When the FHSA makes more sense

If you’re a first-time buyer with a timeline of a few years or more, the FHSA is a stronger tool. Here’s why.

No repayment obligation. This is the big one. After you buy, your FHSA money is yours. You don’t owe anything back. With the HBP, you’re committing to 15 years of repayments on top of a new mortgage, property taxes, and all the other costs that come with homeownership. That $60,000 HBP withdrawal means roughly $4,000 per year going back into your RRSP, every year, for 15 years. That’s money that could go toward your mortgage, your TFSA, or just living your life.

Simpler tax situation. With the FHSA, once you withdraw, you’re done. No tracking annual repayment schedules. No worrying about whether you accidentally triggered a taxable event by missing a payment.

Growth comes out too. If your FHSA grows from $40,000 to $55,000 through investing, you withdraw all $55,000 tax-free. The HBP caps you at $60,000 regardless of how much your RRSP has grown.

When the RRSP HBP makes more sense

The HBP still has a place, and there are situations where it’s the better move.

You already have a large RRSP balance. If you’ve been contributing to your RRSP for years and have $80,000 or $100,000 sitting there, the HBP lets you access up to $60,000 of it for your home. You can’t retroactively put that money into an FHSA.

You’re buying soon and just opened the FHSA. The FHSA only lets you contribute $8,000 per year (up to $16,000 if you have carry-forward room). If you’re buying in the next 12 months, you might only get one year of FHSA contributions in. The HBP gives you immediate access to whatever is already in your RRSP.

You need more than $40,000. The FHSA has a $40,000 lifetime cap on contributions. In expensive markets like Toronto or Vancouver, $40,000 might not cover your full down payment. The HBP lets you access up to $60,000, which could fill the gap.

Your income is high right now. If you’re in a top tax bracket and plan to repay your HBP in lower-income years, the math can work in your favour. You got the deduction at a high rate, and the repayments happen when your income (and therefore your marginal tax rate) might be lower.

The repayment problem, explained

This is worth spending a minute on because it’s where the HBP gets tricky in practice.

Say you withdraw $60,000 from your RRSP through the HBP. Starting two years after the withdrawal, you need to repay at least $4,000 per year (1/15 of $60,000) back into your RRSP. If you repay less, or nothing, the shortfall gets added to your taxable income for that year.

In year one of homeownership, you’re probably already stretched. Mortgage payments, property taxes, insurance, maintenance. Adding a mandatory $4,000 RRSP contribution on top of that is real pressure. And it’s not optional. Miss it, and you owe tax on it.

I’ve talked to people who used the HBP and didn’t fully understand the repayment part until they got their first Notice of Assessment showing an extra $4,000 in income they didn’t expect. It wasn’t a disaster, but it was frustrating.

The FHSA avoids all of this. You withdraw, you buy your home, and you move on.

Timeline matters

How soon you’re buying should heavily influence which account you prioritize.

Buying in 1 to 2 years: The FHSA’s $8,000/year limit means you might only accumulate $8,000 to $16,000 before you buy. That’s still valuable (tax deduction in, tax-free out, no repayment), but if you need a larger down payment, the HBP can supplement it with money already in your RRSP.

Buying in 3 to 5 years: This is the FHSA’s sweet spot. You have time to build up $24,000 to $40,000 in the account, invest it, and benefit from both the tax deduction and tax-free growth. The longer your timeline, the more the FHSA’s no-repayment advantage compounds.

Buying in 5+ years: Max out the FHSA first. You’ll hit the $40,000 lifetime cap and still have years of investment growth ahead of you. If you need more beyond that, the HBP is there as a second source.

What if you never buy?

Life changes. Maybe you decide renting works better for you, or maybe the market shifts your plans.

With the FHSA, if you don’t buy a home within 15 years of opening the account (or by the end of the year you turn 71), you can transfer the full balance into your RRSP without using up any RRSP contribution room. That’s a meaningful benefit. Your contributions were tax-deductible going in, and you didn’t lose anything by having them in an FHSA first.

With the RRSP, the money just stays where it is. Since it was always in your RRSP, nothing changes. You just don’t use the HBP.

Either way, the money isn’t gone. But the FHSA gives you a cleaner exit if homeownership doesn’t end up happening.

Can you use both?

Yes. This is the part that surprises people, and it’s genuinely one of the best strategies available to first-time buyers in Canada.

You can use both the FHSA and the RRSP Home Buyers’ Plan for the same home purchase. There’s no rule against combining them.

Here’s what that looks like in practice. Say you’ve maxed out your FHSA at $40,000 in contributions, and it’s grown to $50,000 through investing. You also have $80,000 in your RRSP. For your home purchase, you could withdraw the full $50,000 from your FHSA (tax-free, no repayment) and $60,000 from your RRSP through the HBP (tax-free, but must be repaid over 15 years). That’s $110,000 from registered accounts for a single buyer.

For a couple where both people qualify, the combined total can exceed $200,000. Two FHSAs and two HBP withdrawals, all used for the same home.

The strategy that makes the most sense for many people: max out the FHSA first (since it has no repayment), and then use the HBP for whatever additional amount you need. That way, you minimize the portion you have to repay while still accessing as much tax-sheltered money as possible.

I wrote a separate guide on combining registered accounts for a home purchase that goes deeper into the math.

The bottom line

The FHSA and the RRSP Home Buyers’ Plan both help first-time buyers get into a home using tax-advantaged money. They’re not interchangeable, though. The FHSA is simpler, cleaner, and doesn’t saddle you with 15 years of repayments. The HBP gives you access to a larger pool of money you may have already saved.

If you’re just starting to save for a home, open an FHSA. Even if you can only put in a small amount, starting the account now begins your contribution room accumulation and gives you the most flexibility down the road.

If you already have a substantial RRSP and you’re buying soon, the HBP is still a solid option, especially as a supplement to the FHSA.

And if you can do both, do both. There’s no reason not to use every tool available to you.