FHSA vs RRSP Home Buyers' Plan: Using Both in Ontario

If you are saving for your first home in Ontario, you have probably heard about two tools: the First Home Savings Account (FHSA) and the RRSP Home Buyers' Plan (HBP). They sound similar, but they work in different ways, and the differences affect how much cash you can bring to closing.

This article explains how each one works, whether you can combine them on one purchase, and how to think about the order in which to use them. It is general information, not advice for your situation.

What each program does

An FHSA is a registered account opened specifically to save for a first home. The Home Buyers' Plan is different: it lets you take money out of your existing RRSP for a home, and you then put that money back over time. One is a savings account you build up for the purpose; the other is a loan from yourself.

The money in an FHSA qualifying withdrawal is tax-free and does not have to be repaid. Money taken out under the HBP has a withdrawal limit of $60,000 and must be repaid to your RRSP over up to 15 years.

Who can open an FHSA

To open an FHSA you must be a resident of Canada, at least 18 (19 where that is the age of majority), and 71 or younger on December 31 of the year you open it. You must also be a first-time home buyer, meaning you have not lived in a qualifying home you owned or jointly owned as your principal residence in the current calendar year or the previous 4 calendar years.

If you have a spouse or common-law partner, there is an extra condition: you also must not have lived, in that same window, in a home your spouse or common-law partner owned or jointly owned as your principal residence. That condition does not apply if you have no spouse or partner.

Participation room is $8,000 in the year you open your first FHSA, and the lifetime limit is $40,000. Unused room may be usable the following year.

FHSA and HBP side by side

Notice that the rules for each program are separate. Meeting the conditions for one does not mean you meet them for the other.

Using both on the same home

You can use the FHSA and the HBP together for the same qualifying home, as long as you meet all the conditions at the time of each withdrawal.

For an FHSA qualifying withdrawal, you must meet all of these conditions:

• You are a first-time home buyer.
• You have a written agreement to buy or build a qualifying home, with completion before October 1 of the year after the withdrawal.
• You acquired the home no more than 30 days before withdrawing.
• You are a Canadian resident.
• You intend to occupy the home as your principal residence within one year.
• You file Form RC725 with the issuer.

Those conditions come from the CRA's FHSA withdrawal rules. If any one is not met at the time of withdrawal, the amount is taxable and must be included in income.

Which should you use first?

There is no single right order, and the rules above do not rank one program over the other. The answer depends on your timeline, your tax situation and how much you have in each account.

• If you have no FHSA yet, remember that your room starts at $8,000 in the year you open it, so the lifetime limit of $40,000 takes time to build.
• If you plan to use the HBP, you will have a repayment schedule to manage. The first minimum repayment is about one-fifteenth of the amount withdrawn.
• If you want to avoid repayments on part of your down payment, the FHSA portion does not need to be repaid.

A temporary relief applies to HBP repayments. For a first withdrawal made between January 1, 2022 and December 31, 2025, and under an extension for first withdrawals between January 1, 2026 and December 31, 2028, the 15-year repayment period starts in the fifth year after the year of the first withdrawal instead of the second. Confirm with the CRA that the extension applies to your withdrawal date.

What to do next

Your savings are only part of the picture. The minimum down payment is 5% for homes of $500,000 or less, 5% of the first $500,000 plus 10% of the portion above $500,000 for homes from $500,000 to $1.5 million, and 20% for homes of $1.5 million or more. Below 20% down, you will typically need mortgage loan insurance.

• Check whether you qualify as a first-time buyer for the FHSA, including your spouse or partner's housing history.
• Add up your FHSA room and your RRSP balance, and estimate your target down payment.
• Line up the written purchase agreement dates with the FHSA withdrawal conditions.
• Ask your mortgage professional how your chosen down payment sources fit with lender requirements.
• Talk to a lawyer or accountant if your situation is unusual, for example if a spouse has owned a home.

Frequently asked questions