FHSA vs. RRSP Home Buyers' Plan: Which Should You Use First?

Both the FHSA and RRSP Home Buyers' Plan help you save for a down payment — but they work very differently. We compare everything with worked examples.

# FHSA vs. RRSP Home Buyers' Plan: Which Should You Use First? If you're saving for your first home in Canada, two powerful registered accounts can help: the **FHSA** and the **RRSP Home Buyers' Plan (HBP)**. Both offer tax advantages — but they work very differently. ## Head-to-Head Comparison | Feature | FHSA | RRSP HBP | | --- | --- | --- | | **Annual Limit** | $8,000 | N/A (RRSP limit) | | **Lifetime Limit** | $40,000 | $60,000 withdrawal | | **Tax Deduction** | Yes | Yes (on contribution) | | **Growth** | Tax-free | Tax-deferred | | **Withdrawal** | Tax-free | Tax-free | | **Repayment** | None | 15 years | | **Carry-forward** | Up to $8,000 | N/A | | **Account Lifetime** | 15 years | N/A | ## The FHSA "Double Tax Advantage" 1. **Tax deduction on the way in** — reduces your taxable income 2. **Tax-free on the way out** — no tax on withdrawals 3. **No repayment** — the money is yours to keep ## The RRSP HBP Repayment Trap With the HBP, you must repay 1/15th of the withdrawn amount each year, starting in the second year after withdrawal. If you miss a payment, that amount is added to your **taxable income**. ### Example: $60,000 HBP Withdrawal - Annual repayment: $4,000/year for 15 years - Miss a payment? That $4,000 becomes taxable income ## Optimal Strategy: Use Both ### Step 1: Max the FHSA First - Open it as early as possible - Contribute $8,000/year for 5 years = $40,000 - All growth and withdrawals are completely tax-free ### Step 2: Use RRSP HBP for the Gap - If you need more than $40,000, use the HBP - Budget for the 15-year repayment schedule ### Worked Example (Couple, 5-Year Timeline) | Source | Person 1 | Person 2 | **Total** | | --- | --- | --- | --- | | FHSA | $40,000 | $40,000 | $80,000 | | RRSP HBP | $60,000 | $60,000 | $120,000 | | **Total** | **$100,000** | **$100,000** | **$200,000** | ## Key Takeaway The FHSA is objectively superior for first-time home savings — no repayment, tax-free growth and withdrawals.

Open one today even if you're years away from buying. Use the RRSP HBP as a supplement, not your primary vehicle.

Published by Circle Real Estate Brokerage — Toronto & GTA pre-construction and resale experts.