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Summary: Three registered accounts let an Ontario first-time buyer save a down payment: the First Home Savings Account (FHSA), the Registered Retirement Savings Plan (RRSP) via the Home Buyers’ Plan, and the Tax-Free Savings Account (TFSA). Together, the three can fund up to $200,000 for a couple.
What’s the difference between an FHSA, TFSA, and RRSP for a home purchase?
Each account offers a different tax advantage. The First Home Savings Account (FHSA) is built specifically for a first home; the Registered Retirement Savings Plan (RRSP) lets you borrow from your retirement savings through the Home Buyers’ Plan (HBP); the Tax-Free Savings Account (TFSA) has no purpose-specific rules.
| FHSA | TFSA | RRSP (via HBP) |
Annual contribution limit | $8,000 | $7,000 (2026) | 18% of prior year’s earned income, up to the annual RRSP dollar cap |
Maximum usable for a home | $40,000 lifetime | No cap | $60,000 per HBP withdrawal |
Contribution is tax-deductible | Yes | No | Yes |
Withdrawal for a first home | Tax-free, if qualifying | Always tax-free | Tax-free, if HBP rules met |
Repayment required | No | No | Yes, over 15 years |
How does the First Home Savings Account work?
The FHSA is the only registered account that combines an RRSP-style tax deduction on the way in with a TFSA-style tax-free withdrawal on the way out. For a first-time buyer in Ontario, that single account does more of the heavy lifting than any other savings vehicle.
The rules from the Canada Revenue Agency (CRA) are straightforward:
Annual contribution limit. $8,000 per year.
Lifetime contribution limit. $40,000 per person.
Carry-forward room. Up to $8,000 of unused room can be carried into the next year, so the most you can contribute in any single year is $16,000.
Account lifespan. You can hold an FHSA for up to 15 years, or until the end of the year you turn 71, whichever comes first.
A first-time buyer earning $90,000 in Ontario who contributes the full $8,000 reduces their taxable income by $8,000. At a roughly 37% marginal rate, that produces about $2,960 back at tax time, which can flow straight back into the account or sit aside for closing costs.
One detail catches many people: contribution room only starts to accumulate once the account is open. If you have not opened an FHSA yet, today is the day.
What about the RRSP Home Buyers’ Plan?
The Home Buyers’ Plan lets a first-time buyer withdraw up to $60,000 from an RRSP, tax-free at the time of withdrawal, and use it as a down payment. The limit rose from $35,000 to $60,000 on April 16, 2024. A couple buying together can pool up to $120,000.
There are two trade-offs to weigh against the FHSA.
The first is repayment. HBP money is a loan from your future self: 15 years to put back into the RRSP, with repayments normally starting the second year after the withdrawal. A temporary Budget 2024 grace period pushes that to the fifth year, but only for withdrawals made between January 1, 2022 and December 31, 2025.
The minimum each year is 1/15 of the amount withdrawn. Any shortfall in a given year is added to your taxable income for that year, and the lost contribution room does not come back.
The second is timing. RRSP contributions made within 89 days of an HBP withdrawal may not be deductible. The withdrawal itself can still happen, but funding the RRSP at the last minute to support a down payment does not produce the tax benefit you might expect.
The HBP earns its place when you already have meaningful RRSP savings built up. Our guide to the Home Buyers’ Plan covers the eligibility and repayment rules in detail.
Where does the TFSA fit in?
The TFSA is not optimized for a down payment because contributions are not tax-deductible. It still belongs in the plan for its flexibility. As of 2026, the annual limit is $7,000, and anyone 18 in 2009 who has never contributed has $109,000 of cumulative room (Canada.ca).
The TFSA does the most work in a down payment strategy in a few specific situations:
You’ve filled the FHSA and the HBP already. Anything beyond those caps has to go somewhere, and the TFSA is the most flexible home for it.
You may not qualify as a first-time buyer. The FHSA has strict eligibility rules; the TFSA has none.
Your timeline is under a year. You want zero repayment obligations and full liquidity.
Your partner has already used their FHSA lifetime limit. You can keep stacking jointly using their TFSA room.
In what order should an Ontario first-time buyer use these accounts?
For a buyer who qualifies as a first-time homebuyer and wants to maximize the down payment, the most tax-efficient sequence is FHSA first, RRSP HBP next, TFSA for the overflow. Each account picks up where the last one leaves off.
Open and fill the FHSA first. $8,000 per year, up to $40,000 lifetime. Nothing else gives you a deduction going in and a tax-free withdrawal coming out for the same dollars.
Layer in the RRSP Home Buyers’ Plan. Withdraw up to $60,000 of existing RRSP savings under the HBP, after the 89-day rule has been satisfied. Plan the 15-year repayment into your post-closing budget.
Use the TFSA for the rest. Once the FHSA and HBP are tapped, the TFSA absorbs additional savings without any eligibility, repayment, or withdrawal restrictions.
Used together by a couple of first-time buyers, the FHSA and HBP alone can reach up to $200,000 ($40,000 FHSA plus $60,000 HBP per person) with a multi-year savings runway, before any TFSA contributions, Land Transfer Tax rebates, or cash savings.
A first-time buyer in Ontario can also claim up to $4,000 in Ontario Land Transfer Tax rebate, plus up to $4,475 in Toronto Municipal Land Transfer Tax rebate on a Toronto purchase, for a combined maximum of $8,475 applied at closing. (Toronto’s graduated MLTT rates took effect April 1, 2026; the first-time rebate cap is unchanged, but the tax owed on higher-value Toronto purchases is now calculated under the new schedule.) Our first-time home buyer incentives in Ontario guide gathers these programs in one place.
At Ownright, we focus entirely on Ontario residential real estate law. We help first-time buyers with purchase closings, including coordination of the FHSA, HBP withdrawals, and Land Transfer Tax rebates at the closing table. You can start your closing online or get in touch with any questions.
Frequently asked questions
Can I use my FHSA and the RRSP Home Buyers’ Plan together for the same home?
Yes. Since 2023, the federal government has allowed first-time buyers to combine an FHSA withdrawal and an HBP withdrawal for the same qualifying home purchase. There is no rule forcing you to pick one or the other.
Do I need to be a Canadian citizen to open an FHSA?
No, but you do need to be a resident of Canada, at least 18 (or the age of majority in your province), and a first-time homebuyer as the CRA defines it. For opening an FHSA, that means you have not lived in a home you or your spouse owned in the current year or the four prior calendar years. The same idea applies at withdrawal time, but the test then excludes the 30 days immediately before the withdrawal.
What happens to my FHSA if I do not buy a home?
You can transfer the balance into an RRSP or a Registered Retirement Income Fund (RRIF) tax-free, with no impact on your existing RRSP contribution room. You can also withdraw the money as taxable income. There is no rule forcing the funds to be used on a home.
Is the down payment from my TFSA reported as income?
No. TFSA withdrawals are never taxable and are not reported as income, regardless of what you use the money for. The withdrawn amount is added back to your contribution room on January 1 of the following year.
How long do I have to wait between contributing to my RRSP and withdrawing under the HBP?
At least 89 days. RRSP contributions made within 89 days of an HBP withdrawal may not be deductible. The HBP withdrawal itself can still go ahead, but the recent contributions won’t produce the tax deduction you were planning on.
Can my spouse and I each claim the full HBP and FHSA limits?
Yes. The HBP withdrawal limit of $60,000 and the FHSA lifetime limit of $40,000 are per person. Two first-time buyers buying together can each claim the full amounts, pooling up to $200,000 from these two programs alone with a multi-year savings runway.
About the author
Joel Fox is a co-founder and COO at Ownright. He helps run the firm’s day-to-day work on Ontario residential closings, refinances, and sales, and writes regularly to demystify the parts of a transaction that most homeowners only encounter once or twice in their lives.
Legal references: First Home Savings Account, Tax-Free Savings Account, and Registered Retirement Savings Plan rules under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.). Home Buyers’ Plan withdrawal limit increased to $60,000 effective April 16, 2024, per Department of Finance Canada (Budget 2024). Land Transfer Tax rebates under the Land Transfer Tax Act, R.S.O. 1990, c. L.6 and the City of Toronto Municipal Code, Chapter 760.
Important note: This article is not legal advice. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate legal or professional advice.
