FHSA vs. the RRSP Home Buyers' Plan for your first home

The First Home Savings Account allows $8,000 of contributions a year to a $40,000 lifetime maximum. Contributions are deductible like an RRSP, and qualifying withdrawals for a first home are tax-free like a TFSA — the only registered account in Canada that is both.

Unused room carries forward one year at a time, so opening the account is worth doing even if you cannot fund it yet. The account can stay open for 15 years, or until the end of the year you turn 71, and unused balances can be rolled into an RRSP without using RRSP room.

The HBP lets you withdraw up to $60,000 from an RRSP for a first home, tax-free at the time of withdrawal. Repayment starts a few years later and runs over 15 years; a missed annual repayment is added to your taxable income for that year.

The HBP works best when you already have a substantial RRSP. Contributing to an RRSP purely to withdraw it a few months later is limited by the rule that contributions must sit in the account 90 days before withdrawal.

A common order: fill the FHSA first because the withdrawal is never repaid, then use the HBP for the remainder of your down payment, then top up with TFSA savings for closing costs.

Claim the deduction in the year it helps most. FHSA and RRSP deductions can be carried forward, so if you expect a promotion, holding the deduction until you are in a higher bracket increases the refund.

The federal Home Buyers' Amount is a non-refundable credit on a $10,000 base, worth about $1,400. Several provinces add a land transfer tax rebate for first-time buyers — Ontario, British Columbia, Prince Edward Island and the City of Toronto all run one.

The closing-cost calculator on this site applies the first-time rebate for your province automatically, so you can see the real cash needed on possession day.