How to Use FHSA and RRSP for Your Home Down Payment in Canada

Combining FHSA and RRSP withdrawals to buy a home

First-time home buyers in Canada can draw on multiple registered accounts to cover a down payment. The First Home Savings Account (FHSA), introduced in 2023, is specifically designed to help eligible first-time buyers save tax-efficiently for a home. The Home Buyers’ Plan (HBP) lets qualifying buyers withdraw from a Registered Retirement Savings Plan (RRSP) up to a set limit. Meanwhile, Tax-Free Savings Accounts (TFSAs) offer flexible, tax-free access to savings without repayment obligations. Each account has different rules and advantages, so combining them can be a smart approach when done carefully.

Down payment importance and 20% target

Targeting a 20% down payment has clear benefits. Mortgages that are 80% or less of the purchase price typically avoid mortgage default insurance, which can otherwise add a meaningful cost—generally between about 0.6% and 4.5% of the mortgage amount. While it’s possible to buy with as little as 5% down, reaching 20% reduces closing costs and increases affordability over the life of the mortgage. For a $600,000 purchase, a 20% down payment equals $120,000, which is the amount you’ve identified as necessary.

How the FHSA works

The FHSA allows eligible first-time buyers who haven’t owned a home in the previous four years to contribute up to $8,000 per year and up to $40,000 in total. Contributions are tax-deductible and qualifying withdrawals to buy a home are tax-free. There’s no per-withdrawal limit beyond what’s in the account; the main constraints are the annual and lifetime contribution caps. That means if investments in the FHSA grow, you can withdraw more than your total contributions, subject to the account balance at the time of withdrawal.

How the Home Buyers’ Plan (HBP) works

The HBP has been available since 1992 and was updated in 2024 to allow a higher withdrawal limit. Eligible first-time buyers who meet the ownership criteria can withdraw up to $60,000 from their RRSP for a qualifying home purchase. Unlike the FHSA, the HBP sets a maximum withdrawal amount and imposes a repayment schedule: withdrawn amounts must generally be repaid to the RRSP over 15 years in annual instalments. There is temporary relief for withdrawals made before December 31, 2025, which delays repayment start to the fifth year in some cases.

Can you use both FHSA and HBP for the same purchase?

Yes. You and your partner can each use FHSA and HBP withdrawals for the same qualifying home purchase. There is no rule preventing a buyer from combining FHSA withdrawals with RRSP withdrawals under the HBP, whether purchasing alone or jointly. That said, the accounts behave differently and those differences matter when planning how much to withdraw from each.

An FHSA withdrawal is permanent and requires no repayment, making it particularly attractive if you want tax-deductible contributions and tax-free withdrawals without future repayment obligations. FHSA room also does not carry forward after you buy a home—if you buy and remain an owner, you may lose the chance to use that account again unless you requalify as a first-time buyer in the future.

HBP withdrawals are essentially interest-free, temporary access to RRSP funds but come with a structured repayment rule: you must generally repay one-fifteenth of the withdrawn amount each year for 15 years. If you fail to make the required annual repayment, the missed portion is added to your taxable income for that year and you permanently lose the ability to recontribute that amount to your RRSP as HBP room.

Using withdrawals for down payment versus renovations

Withdrawals from an FHSA or through the HBP do not legally have to be used exclusively for the down payment; the requirement is that the funds are used in relation to the purchase of an eligible home. Practically, many buyers apply these funds directly to the down payment because doing so reduces the mortgage amount and associated costs. In your case, Ryan, you could withdraw more than the $120,000 down payment and keep some of the proceeds for renovations. If renovation spending is delayed, consider placing the surplus into a TFSA if you have room—this keeps any growth tax-free until you need the money.

Practical planning and asset allocation

Your idea of directing tax refunds from RRSP and FHSA contributions into TFSAs is sensible. A practical priority is to maximize the FHSA annual contribution first (up to $8,000 each year), then contribute to your RRSPs toward the HBP limit, and finally top up TFSAs if you have additional savings. As you get closer to buying—particularly inside a five-year window—shift toward more conservative investments to protect capital. Equities can outperform over the long run, but shorter horizons increase the risk that markets could be lower when you need the funds.

Overall, using a combination of FHSA and HBP withdrawals can work well for your plan. Make sure you track contribution and repayment obligations, watch your asset allocation as the purchase date approaches, and use the TFSA as a flexible place for any extra funds you want to keep tax-free.

Read more about home buying in Canada:

• Why are mortgages so expensive in Canada? A look at 2024 and 2025
• Unsure about buying a home? Why you should open an FHSA now anyway
• Alberta called—“What I wish I’d known before making the move”
• I want to switch mortgage lenders—do I have to pass the stress test again?