Canada’s national average home price has risen approximately 59% over the past decade, according to the Canadian Real Estate Association. The gap between what first-time buyers can accumulate on their own and what a down payment now requires has changed the nature of the conversations families are having about homeownership. For both first-time buyers and the families supporting them, understanding how Canada's three key registered accounts work together to support first-time home ownership has become more relevant.
The First Home Savings Account (FHSA), the Registered Retirement Savings Plan (RRSP), and the Tax-Free Savings Account (TFSA) each play a unique role in a first home savings plan. The order in which they’re used matters, and together they can substantially reduce the tax cost of building a down payment.
This article outlines how each account works and how they can be used together.
Account Types
First Home Savings Account (FHSA)
The FHSA is purpose-built for first-time homebuyers. Contributions are tax-deductible and growth is tax-sheltered; withdrawals for a qualifying home purchase are also tax-free. If the funds are ultimately not used for a home, they can be transferred directly to an RRSP without affecting existing contribution room, making it a low-risk account to open early, even when a purchase timeline is uncertain.
Eligibility requires the account holder to be between 18 and 71, a Canadian resident, and a first-time home buyer.¹ The annual contribution limit is $8,000 (including any RRSP transfers in), with a lifetime maximum of $40,000. Up to $8,000 of unused room can be carried forward to the following year. The account can remain open for 15 years or until the end of the year the account holder turns 71, whichever comes first.
Registered Retirement Savings Plan (RRSP) and the Home Buyers’ Plan
The RRSP is primarily a retirement savings vehicle, but it includes the Home Buyers’ Plan (HBP), which allows first-time buyers to withdraw up to $60,000 toward a qualifying home purchase. These withdrawals are not taxed at the time they are made, and must be repaid to the RRSP over a maximum of 15 years, beginning the fifth year after withdrawal, for withdrawals made by the end of 2028. After 2028, the repayment schedule will revert back to starting the second year after the withdrawal. Amounts not repaid are included in taxable income for that year.
RRSP eligibility requires earned income. The annual contribution limit is 18% of prior-year earned income, up to the 2026 maximum of $33,810. Unused room carries forward indefinitely to age 71, at which point the RRSP must be converted to a RRIF or annuity, or paid out as a lump sum.
Tax-Free Savings Account (TFSA)
The TFSA is the most flexible of the three. Contributions are not tax-deductible, but growth and withdrawals are entirely tax-free, with no restrictions on how the funds are used. There are no age or account lifespan limitations, and withdrawn amounts are added back to available contribution room the following calendar year.
The 2026 TFSA contribution limit is $7,000. All Canadians over 18 are eligible, with no income requirement.
Account Comparison
| FHSA | RRSP (Home Buyers’ Plan) | TFSA | |
|---|---|---|---|
| Primary purpose | First home purchase | Retirement savings; first home purchase via HBP | Flexible savings and investing |
| Eligibility | Age 18–71, Canadian resident, first-time home buyer¹ | Age 18–71, earned income required; first-time home buyer² for HBP | All Canadians age 18+ |
| Annual contribution limit | $8,000 (incl. RRSP transfers) | 18% of prior-year earned income, up to $33,810 maximum | $7,000 |
| Lifetime maximum | $40,000 | No lifetime cap | No lifetime cap |
| Carry-forward | Up to $8,000 unused room | Yes, to age 71 | Yes, indefinitely |
| Account lifespan | 15 years or to age 71 | Must convert by age 71 | No age limitation |
| Tax-deductible contributions | Yes | Yes | No |
| Withdrawals taxable | No, for qualifying home purchase | No at time of HBP withdrawal; repayment required over 15 years | No |
| Additional notes | Unused funds can transfer to RRSP/RRIF tax-free, without affecting contribution room | HBP maximum withdrawal: $60,000. Repayment temporarily begins fifth year after withdrawal. | Withdrawn amounts re-added to room the following calendar year |
Contribution limits and eligibility rules are subject to change. Confirm current limits with your Investment Counsellor or at Canada.ca.
A Note on Sequencing
For most first-time buyers, the FHSA is the logical starting point. It offers a tax deduction on contributions and tax-free growth; the qualifying withdrawal is also tax-free. No other registered vehicle matches this combination for first home savings. Opening an FHSA early, even well before a purchase is planned, preserves contribution room and maximizes the cumulative deduction over time. The tax deduction may be valuable for high income earners, but the lower annual and total contribution limit are limiting factors.
The optimal mix of RRSP and TFSA contributions alongside the FHSA depends largely on income. For higher-income earners, RRSP contributions offer a valuable deduction, and the Home Buyers’ Plan provides an additional $60,000 in purchasing power, though the 15-year repayment obligation should be factored into post-purchase cash flow planning. Since the funds will be repaid into the RRSP, the HBP is really a deferral not a tax-free savings method. For those earlier in their careers with lower current income, the TFSA may be the better complement to the FHSA. It preserves RRSP room for years when the deduction will carry greater value, and imposes no repayment conditions, and can be used for any purpose as it’s not tied to purchasing a home or retirement.
One planning detail worth noting: the FHSA, RRSP HBP, and TFSA can all be used together, and couples can both use each type of account to buy a home together. A first-time buyer could access $40,000 from their FHSA (plus accumulated growth) and $60,000 from their RRSP via the HBP for $100,000+ in registered savings each toward a single qualifying purchase, plus additional tax-free funds from their TFSA
Supporting the Next Generation
Gifting toward a first home purchase has become a common consideration in family financial planning. For parents or grandparents thinking about how to structure that support, when and how the funds are transferred affect both the tax outcome and the total value the gift delivers.
Directing the gift toward an FHSA early in the savings timeline, rather than at the point of purchase, gives the money time to compound tax-free. A contribution to an FHSA must be made by the account holder, but parents or grandparents can gift the funds for the adult child to contribute. The child receives the tax deduction, the money compounds in a tax-sheltered environment, and compounding does its work before the purchase happens.
Families should also think about how the gift or transfer is structured. A direct gift requires no repayment and keeps the transaction simple. A forgivable loan is another option, often preferred when parents want to have some protection of the transferred funds or where fairness or equalization across siblings is a factor. One thing to note: if the transfer is documented as a loan, even a forgivable one, some lenders will treat it as a liability when assessing the borrower's debt service capacity. Gifting or loaning is worth reviewing with your legal counsel to determine if and how the loan provides the desired protection, and review with a mortgage broker to determine if it will negatively affect borrowing options.
Either approach is worth reviewing alongside broader estate and tax planning. Your Mawer Investment Counsellor can help coordinate this within the larger family picture.
Choosing the Right Strategy
The most effective approach depends on income, marginal tax rate, timeline, and how homeownership fits within broader financial goals. A strategy that works well for a high-income earner in their mid-thirties looks different from one designed for someone just starting out.
If you are supporting a family member through their first home purchase your Mawer Investment Counsellor can help ensure this planning fits within the larger financial picture. These accounts are often just one part of a broader intergenerational conversation about wealth.
Source: Canadian Real Estate Association (CREA) housing market statistics. crea.ca/housing-market-stats/canadian-housing-market-stats/
1 When opening the account, you did not live in a qualifying home as your principal place of residence that you or your spouse (if you have a spouse) owned or jointly owned in this calendar year or in the previous four calendar years. When withdrawing you must have a written agreement to buy or build a qualifying home with the acquisition or construction completion date of the qualifying home before October 1 of the year following the date of the withdrawal. You must not have acquired the qualifying home more than 30 days before making the withdrawal. You must occupy or intend to occupy the qualifying home as your principal place of residence within one year after buying or building it. For full details, visit Canada.ca
2You must be a resident of Canada when you withdraw funds from your RRSP under the HBP. You did not live in a qualifying home as your principal place of residence that you owned or jointly owned in this calendar year or in the previous four calendar years. You must have a written agreement to buy or build a qualifying home. A qualifying home under the HBP is a housing unit located in Canada. You must intend to occupy the qualifying home as your principal place of residence within one year after buying or building it. If you have previously participated in the HBP, you may be able to do so again if your repayable HBP balance on January 1st of the year of the withdrawal is zero and you meet all the other HBP eligibility conditions. For full details, visit Canada.ca.