For most first-time buyers starting from scratch, the FHSA wins: it offers the same deduction as an RRSP contribution plus a completely tax-free withdrawal — with no repayment obligation. The HBP is better if you already have substantial RRSP savings and a home purchase is imminent. The smartest strategy uses both together.
Side-by-Side Comparison
| Feature | FHSA | Home Buyers' Plan (HBP) |
|---|---|---|
| Contribution deductible? | Yes — like an RRSP | N/A (using existing RRSP savings) |
| Annual contribution limit | $8,000 | No annual contribution (withdrawal limit) |
| Lifetime limit | $40,000 contributions | $60,000 withdrawal per person |
| Repayment required? | No | Yes — over 15 years |
| Withdrawal taxable? | No (qualifying home purchase) | No (as long as repaid on schedule) |
| Uses existing savings? | No (new contributions) | Yes (existing RRSP balance) |
| 90-day waiting rule? | No | Yes — funds must be in RRSP 90+ days |
| First-time buyer required? | Yes (4-year look-back) | Yes (4-year look-back) |
When the FHSA Wins
The FHSA is the superior choice in most scenarios where you're starting fresh — saving for a home purchase that's more than a year or two away. Here's why:
- No repayment obligation. When you withdraw qualifying FHSA funds for a home purchase, that money is gone and never needs to go back. There's no 15-year repayment schedule, no risk of missing a payment, no income hit if you forget to designate repayments.
- Double tax benefit. You get a deduction on the way in AND tax-free treatment on the way out. The HBP only provides tax deferral (the RRSP deduction was already claimed when the funds went into the RRSP; the HBP withdrawal is tax-free only if repaid).
- Growth inside the account is permanently sheltered. Every dollar of investment growth inside the FHSA — capital gains, dividends, interest — is tax-free on withdrawal. With the HBP, the RRSP's investment income is still subject to tax when ultimately withdrawn in retirement (even if the HBP withdrawal itself is not).
- Best for longer time horizons. If you're planning to buy in 3–7 years, the FHSA gives you time to accumulate up to $40,000 ($8,000/year) and grow it tax-free.
If you're in your 20s or early 30s and just starting to save for a home, the FHSA should be the primary vehicle. Open it now, max it every year you're eligible, and invest the funds appropriately for your time horizon. The HBP is a supplement, not a replacement.
When the HBP Wins
The HBP makes more sense in specific scenarios:
- You already have significant RRSP savings. If you've been contributing to an RRSP for years and have $40,000–$60,000 sitting there, the HBP allows you to redeploy those funds for a down payment without waiting to build an FHSA. The deduction was already taken when the RRSP contributions were made.
- You're buying very soon. If you're purchasing within 6–12 months and don't have time to build FHSA savings, the HBP lets you access existing RRSP savings immediately (subject to the 90-day waiting rule on any recent contributions).
- You've maxed out your FHSA room. If you've already contributed the full $40,000 lifetime limit to your FHSA, the HBP lets you access additional tax-sheltered savings from your RRSP.
- Limited cash flow for new contributions. If you can't afford to make new FHSA contributions but have RRSP savings already accumulated, the HBP turns existing savings into a (temporarily) tax-free source of funds.
The "Best of Both" Strategy
For couples who have a few years before they plan to buy, the optimal strategy combines both programs:
- Open FHSAs immediately (both partners, if both are first-time buyers) to start accumulating the $8,000 annual room.
- Max FHSA contributions every year until you buy, up to the $40,000 lifetime maximum per person. Invest appropriately for your timeline.
- Continue contributing to RRSPs for retirement savings — or for strategic HBP use if you want additional down payment funds.
- At purchase time: Make qualifying FHSA withdrawals (tax-free, no repayment). If more funds are needed for the down payment, use the HBP to withdraw up to $60,000 per person from the RRSP.
Combined per-person maximum: $40,000 (FHSA) + $60,000 (HBP) = $100,000 per person in tax-sheltered down payment funds. For a couple where both qualify: up to $200,000 combined.
Eligibility Traps to Watch
- Both programs require first-time buyer status. The 4-year look-back rule applies to both the FHSA and the HBP. If you owned a home where you lived within the past 4 calendar years (or your partner did), neither program is available to you.
- HBP 90-day rule: Money must have been in your RRSP for at least 90 days before an HBP withdrawal. If you rush to top up your RRSP just before buying, those recent contributions may not qualify.
- FHSA must be open to generate room. You can't retroactively open an FHSA for past years. The room clock starts when the account is opened. If you open your FHSA the month before you want to withdraw, you only have $8,000 of room available (assuming you didn't open it in a prior year).
- FHSA carryforward is limited: Unlike RRSP room that carries forward forever, FHSA room only carries forward one year ($8,000 maximum). This is another reason to open early.
Real Dollar Example: A Couple Over 5 Years
Sam and Alex are both 28, both first-time buyers, planning to buy in Toronto in 2030. They each earn $90,000 per year (combined marginal rate approximately 43.41%).
Year 1 (2025): Both open FHSAs immediately. Each contributes $8,000. Tax saving per person: $8,000 × 43.41% = $3,473. Combined tax saving: $6,946.
Years 2–5 (2026–2029): Same contributions, same savings each year.
Total FHSA contributions per person after 5 years: $40,000 (lifetime maximum reached).
Total combined FHSA tax savings on contributions: ~$34,728
FHSA balance (assuming 5% annual return, 5 years): approximately $88,000 combined (both accounts together)
At purchase (2030): Both make qualifying FHSA withdrawals. Entire $88,000+ is tax-free. Then each uses the HBP to withdraw a further $60,000 from their RRSPs: $120,000 more available for the down payment (to be repaid over 15 years).
Total accessible down payment funds: approximately $208,000.
Model your FHSA and RRSP savings for a future home purchase
Use our Ontario tax calculator to see exactly how much an FHSA contribution saves you on your 2025 return.
Frequently Asked Questions
If I already used the HBP before and repaid it fully, can I also use the FHSA for a second home?
The FHSA requires first-time buyer status — you cannot have owned a home (or had a spouse who owned one as your shared principal residence) in the current or preceding four years. If you sold your prior home more than four years ago and have fully repaid the HBP, you may qualify as a first-time buyer again. The FHSA rules apply the same 4-year look-back window as the HBP, so if you meet the HBP's first-time buyer test for a second use, you likely meet the FHSA's test as well. Verify the exact dates before opening an FHSA.
Is the FHSA better than just saving in a TFSA for a down payment?
Almost always yes for eligible first-time buyers. The FHSA gives you an additional tax deduction on the way in that the TFSA doesn't provide — effectively giving you the same double benefit as depositing into a TFSA but with a refund cheque when you file. Both accounts allow completely tax-free growth and withdrawals for a qualifying home purchase. The only scenario where TFSA might be preferred is if you have meaningful uncertainty about your first-time buyer status (for example, if your eligibility is borderline), since TFSA withdrawals aren't contingent on any qualifying purchase conditions.
Can I contribute to the FHSA and defer the deduction to a higher-income year?
Yes. Like RRSP contributions, FHSA deductions can be deferred to future tax years. You can contribute to your FHSA this year — locking in tax-free investment growth and preserving your available room — and then wait to claim the deduction on your T1 until a year when you're in a higher tax bracket. The unused deduction carries forward indefinitely on your tax records. Simply do not enter the amount on line 20805 of your T1 in the current year.
What happens to FHSA room I never used — does it expire?
Unused FHSA annual room carries forward by up to $8,000 (one year's worth). It doesn't accumulate indefinitely the way RRSP room does. For example, if you had $8,000 of unused 2024 room and contribute $0 in 2025, you have $16,000 available in 2025 — but on January 1, 2026, you still only gain another $8,000 (not the accumulated two unused years). The FHSA account itself must be closed within 15 years of opening or by December 31 of the year you turn 71, whichever comes first.
My partner isn't a first-time buyer. Can I still open an FHSA?
It depends on whether your partner's home was also your principal residence. If your spouse or common-law partner currently owns (or owned in the last 4 calendar years) a home that was your shared principal place of residence, you do not qualify as a first-time buyer for FHSA purposes. However, if your partner owned a home that was their own principal residence before you moved in together, or owned a property that was never your home, you may still qualify under the FHSA rules — because the test is based on homes where you lived, not homes your partner owns. When in doubt, consult the CRA's eligibility criteria or a tax professional.