FHSA vs. the RRSP Home Buyers' Plan: Should You Use Both?

Two different tools, one shared goal

The FHSA, introduced in 2023, is a hybrid: contributions are tax-deductible like an RRSP, but qualifying withdrawals for a first home are completely tax-free like a TFSA — no repayment required, ever. At launch, the annual contribution limit was set at $8,000 with a lifetime limit of $40,000, and unused room carries forward one year at a time. Confirm the current limits with the CRA before you contribute, since they're indexed and could change.

The Home Buyers' Plan is older and works differently. You withdraw money you've already contributed to an RRSP, and you must repay it back into your RRSP over time — generally over 15 years, starting the second year after you withdraw — or the unpaid portion gets added to your taxable income each year you miss a repayment. The federal government raised the HBP withdrawal limit in the 2024 budget; ask the CRA or check canada.ca for the exact current figure, since this is a number that has moved before and could move again.

Both programs require you to be a first-time home buyer, which the CRA defines narrowly: broadly, you (and your spouse or common-law partner, in some cases) can't have owned and lived in a home as a principal residence in the current calendar year or the four preceding ones. The precise wording matters, so check it before you assume you qualify.

Yes, you can use both on the same purchase

This is the part people miss: the FHSA and the HBP are not either/or. If you have an eligible RRSP balance and an FHSA, you can withdraw from both to fund a single qualifying home purchase, generally within the same window of time. That means the tax-advantaged pool available to one buyer can meaningfully exceed what either account offers alone.

The key structural difference is what happens afterward. FHSA withdrawals used for a qualifying home purchase are gone — no obligation to put the money back. HBP withdrawals are a loan from your own RRSP to yourself, and missed repayments become taxable income. That difference should shape how you split your saving between the two.

How to think about the order of operations

If buying a first home is even a plausible medium-term goal, opening an FHSA early is usually the easy win: the contribution is tax-deductible now, growth inside the account is tax-sheltered, and withdrawal for a home is tax-free later. There's little downside to opening one well before you're ready to buy, since unused room carries forward and unused funds can eventually roll into an RRSP.

• If you already have RRSP savings sitting there, the HBP lets you redirect money that's already tax-sheltered toward a down payment, without needing new deductible contributions. - If you're still building savings from scratch, prioritize the FHSA first for new dollars, since it gets you a deduction now and never has to be repaid. - If you want to maximize total funds available at closing, use both: FHSA funds you don't need to repay, plus RRSP funds via the HBP that you're prepared to repay on schedule. - Time your FHSA contributions to land before a tax year-end when you want the deduction, similar to RRSP planning.

One practical wrinkle: FHSA contributions and HBP withdrawals both typically need to happen before you take possession of the home (with some flexibility around timing), so this isn't something to sort out at the last minute. Talk to your bank, credit union, or a fee-only advisor about the sequencing for your specific closing date.

What to watch for

The HBP repayment obligation is the thing that trips people up years later. It doesn't show up as a bill — it's a required minimum RRSP contribution designation each year, and if you skip it (or don't contribute enough to your RRSP that year to cover it), the shortfall is added to your income and taxed. Track it, because CRA will send reminders but the responsibility to repay correctly is yours.

The FHSA has its own deadline pressure: the account has to be closed within a set number of years of opening or by a certain age, whichever comes first, even if you haven't bought a home. Know that timeline going in so a stalled house search doesn't force a rushed decision.

Also remember these are general mechanics, not a personalized plan. Whether it makes sense to prioritize FHSA contributions over RRSP contributions for retirement, or how much to draw under the HBP versus keep invested for retirement, depends on your income, timeline, and other savings — that's worth a real conversation with an advisor, not a rule of thumb from an article.

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