HBP vs FHSA for a first-home down payment

Canada now offers two federal tax-advantaged vehicles for first-home savers: the longstanding Home Buyers' Plan (HBP), which lets you borrow from your own RRSP, and the relatively new First Home Savings Account (FHSA), introduced in 2023. For most first-time buyers under 71, the FHSA is the strictly better starting point, but the HBP still has a role when the FHSA is exhausted or unavailable.

How the FHSA works

The First Home Savings Account combines the deduction of an RRSP with the tax-free growth and withdrawal of a TFSA. You can contribute up to $8,000 per year, with a lifetime maximum of $40,000 per person. Contributions are deductible against current-year income; withdrawals for a qualifying first home purchase are completely tax-free and never need to be repaid.

How the HBP works

The Home Buyers' Plan lets a first-time buyer withdraw up to $60,000 from their RRSP without immediate tax consequences. The withdrawal must be repaid into the RRSP over 15 years; missed repayments are added to taxable income for that year. The HBP does not generate new RRSP deduction, you already deducted the contribution when you made it; the withdrawal just moves money out without triggering the usual RRSP withholding tax.

Why the FHSA usually wins

The FHSA has no repayment obligation. The HBP, by contrast, requires you to recontribute 1/15th of the withdrawn amount per year for 15 years, reducing the cash you have available to direct toward TFSA, RESP, or additional savings during your most expensive years of homeownership. For a household able to contribute the full $8,000 annual FHSA room from age 25 to 30, the lifetime $40,000 cap funds a meaningful share of a first-home down payment with zero repayment friction.

Why the HBP is not dead

The HBP remains useful in three cases: (a) your RRSP already holds far more than $40,000 and you want to tap into that, (b) you started saving after age 35 and have less FHSA runway, or (c) you need more than the $40,000 FHSA cap and want to combine both vehicles. The two are stackable: the federal government explicitly allows combined HBP + FHSA use on the same first-home purchase.

Important eligibility rules

Both vehicles require that you not have lived in a home you owned in the previous four calendar years (or with a spouse who did). The FHSA must be closed within 15 years of opening, or by age 71, whichever comes first. Unused FHSA funds at closure can be transferred to an RRSP or RRIF without penalty, they do not vanish.

Provincial supplements

Several provinces add their own first-time-home-buyer incentives on top of the federal HBP and FHSA, including the Land Transfer Tax rebate in Ontario and the Property Transfer Tax exemption in British Columbia. These are administered at the provincial level and are not modelled by PlainRRSP; check your provincial finance ministry's first-home page for current eligibility.

Continue reading: RRSP contribution room · RRSP vs TFSA

Registered-account reference

RRSP, TFSA and RESP rules each have separate contribution-room mechanics. Use your latest CRA deduction-limit statement as the authoritative figure for an RRSP decision; a Notice of Assessment, reassessment, Form T1028 and the CRA account can change that figure.

Pension adjustments and unused RRSP room

A pension adjustment is reported in box 52 of a T4 or box 034 of a T4A and generally reduces the following year's RRSP deduction limit. Unused RRSP room can carry forward, but the amount available to deduct is the figure the CRA records for you. Read the CRA pension-adjustment guidance.

Excess-contribution rules

The CRA says unused RRSP contributions that exceed the deduction limit by more than $2,000 generally face a 1% monthly tax. TFSA excess amounts are also generally taxed at 1% per month. Remove an excess promptly and use the CRA's instructions for the relevant return rather than relying on a generic cleanup rule. RRSP excess-contribution rules and TFSA excess-contribution rules explain the exceptions, calculation and filing steps.

2026 registered-account contribution ceilings