Stacking the FHSA, the Home Buyers’ Plan, and Your Down Payment

Saving a down payment is the biggest hurdle for most first-time buyers. The good news is that Canada built two tools specifically to help, and when you use them together, they’re genuinely powerful. Here’s how the FHSA and the Home Buyers’ Plan work, and how to stack them.

The FHSA: the best of both worlds

The First Home Savings Account lets you contribute up to $8,000 per year, to a lifetime maximum of $40,000. Contributions are tax-deductible like an RRSP, and withdrawals for your first home are completely tax-free like a TFSA. That combination makes it the single best place for most first-time buyers to save.

The Home Buyers’ Plan: borrow from your future self

The Home Buyers’ Plan lets you withdraw up to $60,000 from your RRSP toward your first home, tax-free, as long as you pay it back over 15 years. If you’ve already got money in an RRSP, this puts it to work for your purchase without triggering tax.

Stacking them together

Here’s the strategy most people miss: you can use both. A couple buying together can each use their own FHSA and their own HBP, which can add up to a very large down payment built almost entirely from tax-advantaged dollars. Contributing to the FHSA also lowers your taxable income today, and that refund can go right back into your savings.

Start the accounts now

Even if you’re a year or two from buying, opening an FHSA starts the clock on your contribution room. The earlier you set these up, the more room you build and the faster your down payment comes together.

Keep reading

Cosigner vs. Guarantor: What’s the Difference?How Much Down Payment Do You Actually Need? (Ontario & Alberta Edition)Closing Costs in Ontario & Alberta: The Cash You Need Beyond the Down Payment