Saving for a first home in Canada used to mean one tax-assisted option: the RRSP Home Buyers' Plan, with its mandatory 15-year repayment schedule. Since 2023, there is a better one. The First Home Savings Account (FHSA) combines the best features of an RRSP and a TFSA — deductible contributions and tax-free withdrawals — with no repayment required.
This guide compares the FHSA against the RRSP Home Buyers' Plan, shows how to use both together, and explains what happens if your plans change.
How the FHSA Works
- Annual contribution limit: $8,000
- Lifetime limit: $40,000
- Account lifespan: up to 15 years, or until December 31 of the year you turn 71
- Contributions: tax-deductible, like an RRSP — they reduce your taxable income
- Qualifying withdrawals: completely tax-free, like a TFSA — and never repaid
- Unused room: carries forward to future years (but no retroactive room accrues before you open the account — open one early even with $0)
Eligibility is straightforward: you must be a Canadian resident between 18 and 71, and neither you nor your spouse/common-law partner can have owned a home you lived in during the current year or the four preceding calendar years.
How the RRSP Home Buyers' Plan Works
The Home Buyers' Plan (HBP) lets you withdraw up to $35,000 from your RRSP tax-free to buy or build a qualifying home. The catch: it is a loan from yourself. Repayment starts the second year after withdrawal and is spread over 15 years — roughly $2,333 per year on a full $35,000 withdrawal. Any amount you fail to repay in a given year is added to your taxable income for that year.
Two more fine-print items: RRSP contributions must sit in the account for at least 90 days before they become eligible for HBP withdrawal, and withdrawing shrinks your RRSP's tax-sheltered compounding base for years.
FHSA vs HBP: Side by Side
| Feature | FHSA | RRSP Home Buyers' Plan |
|---|---|---|
| Tax deduction on contributions | Yes | Yes (when originally contributed) |
| Tax on qualifying withdrawal | None | None |
| Repayment required | No — never | Yes — over 15 years |
| Maximum per person | $40,000 lifetime | $35,000 per withdrawal |
| Contribution room used | Separate FHSA room | Uses your RRSP room |
| If you never buy | Transfer to RRSP/RRIF tax-free | Money stays in RRSP (no harm) |
The FHSA wins on almost every dimension for genuine first-time buyers: no repayment, no 90-day seasoning, and it does not consume RRSP room. The HBP's remaining advantage is capacity — it lets you tap a larger existing RRSP balance.
The Power Move: Use Both Together
Nothing stops you from stacking them. A first-time buyer can contribute $8,000/year to an FHSA and withdraw $35,000 from an RRSP under the HBP for the same purchase — up to $75,000 per person of tax-assisted home funding, or $150,000 for a buying couple.
A sensible funding order:
- Fill the FHSA first ($8,000/year) — it is use-it-or-lose-it annual room with the best tax treatment.
- Then build RRSP room for a future HBP withdrawal — especially in high-income years when the deduction is most valuable.
- Keep the TFSA as your flexible reserve — for closing costs, moving expenses, and the inevitable first-year home repairs.
What If You Never Buy?
Plans change. If the FHSA's 15-year window closes without a qualifying home purchase, you can transfer the full balance — contributions and growth — directly into your RRSP or RRIF without using any RRSP contribution room and without tax. It is a graceful exit: the worst case is that your FHSA simply becomes extra RRSP room you would not otherwise have had.
Non-qualifying withdrawals (taking the money out for anything other than a first home) are taxed as income and permanently lose the contribution room — so do not open an FHSA as a general savings account.
Frequently Asked Questions
What is the FHSA contribution limit?
$8,000 per year up to a $40,000 lifetime maximum, over a maximum 15-year account life. Unused annual room carries forward. Open an account early — room only starts accruing after you open it.
Is the FHSA better than the RRSP Home Buyers' Plan?
For most first-time buyers, yes: deductible contributions, tax-free withdrawals, and no 15-year repayment obligation. The HBP remains useful for tapping larger existing RRSP balances.
Can I use both the FHSA and the Home Buyers' Plan?
Yes — up to $75,000 per person ($40,000 FHSA lifetime + $35,000 HBP) for the same home purchase, or $150,000 for a couple.
Who qualifies as a first-time home buyer?
A Canadian resident aged 18–71 who has not — and whose spouse/common-law partner has not — owned and lived in a home during the current calendar year or the four preceding years.
How Much Does an $8,000 FHSA Contribution Save You?
Run your province's numbers in the Canadian tax calculator to see the real dollar value of the FHSA deduction at your income.
Open Canada Tax Calculator →Related guides
- RRSP vs TFSA — how the FHSA compares to the classic pair
- OAS Clawback Explained — why withdrawal timing matters in retirement