Home Buyers’ Plan vs FHSA — which down-payment vehicle?

By PlainRRSP Editorial · June 2026

Canada now offers two federal tax-advantaged vehicles for first-home savers: the longstanding Home Buyers' Plan (HBP), which lets you borrow from your own RRSP, and the relatively new First Home Savings Account (FHSA), introduced in 2023. For most first-time buyers under 71, the FHSA is the strictly better starting point — but the HBP still has a role when the FHSA is exhausted or unavailable.

How the FHSA works

The First Home Savings Account combines the deduction of an RRSP with the tax-free growth and withdrawal of a TFSA. You can contribute up to $8,000 per year, with a lifetime maximum of $40,000 per person. Contributions are deductible against current-year income; withdrawals for a qualifying first home purchase are completely tax-free and never need to be repaid.

How the HBP works

The Home Buyers' Plan lets a first-time buyer withdraw up to $60,000 from their RRSP without immediate tax consequences. The withdrawal must be repaid into the RRSP over 15 years; missed repayments are added to taxable income for that year. The HBP does not generate new RRSP deduction — you already deducted the contribution when you made it; the withdrawal just moves money out without triggering the usual RRSP withholding tax.

Why the FHSA usually wins

The FHSA has no repayment obligation. The HBP, by contrast, requires you to recontribute 1/15th of the withdrawn amount per year for 15 years, reducing the cash you have available to direct toward TFSA, RESP, or additional savings during your most expensive years of homeownership. For a household able to contribute the full $8,000 annual FHSA room from age 25 to 30, the lifetime $40,000 cap funds a meaningful share of a first-home down payment with zero repayment friction.

Why the HBP is not dead

The HBP remains useful in three cases: (a) your RRSP already holds far more than $40,000 and you want to tap into that, (b) you started saving after age 35 and have less FHSA runway, or (c) you need more than the $40,000 FHSA cap and want to combine both vehicles. The two are stackable: the federal government explicitly allows combined HBP + FHSA use on the same first-home purchase.

Important eligibility rules

Both vehicles require that you not have lived in a home you owned in the previous four calendar years (or with a spouse who did). The FHSA must be closed within 15 years of opening, or by age 71, whichever comes first. Unused FHSA funds at closure can be transferred to an RRSP or RRIF without penalty — they do not vanish.

Provincial supplements

Several provinces add their own first-time-home-buyer incentives on top of the federal HBP and FHSA — including the Land Transfer Tax rebate in Ontario and the Property Transfer Tax exemption in British Columbia. These are administered at the provincial level and are not modelled by PlainRRSP; check your provincial finance ministry's first-home page for current eligibility.

Continue reading: RRSP contribution room · RRSP vs TFSA

Where this fits in your overall registered-account stack

Canadian registered accounts — RRSP, TFSA, FHSA, RDSP, RESP — each have distinct contribution-room mechanics tied to the Income Tax Act (Canada) and Canada Revenue Agency administrative practice. The RRSP is the oldest, dating to 1957 when the federal government created Registered Retirement Savings Plans to encourage household retirement saving. Today the system layers on top of CPP/QPP (mandatory contributions) and OAS (residency-based) — the RRSP is the second pillar of Canadian retirement income.

The TFSA (Tax-Free Savings Account, introduced 1 January 2009) operates on a complementary basis: contributions are not deductible but withdrawals are entirely tax-free. The FHSA (First Home Savings Account, introduced 1 April 2023) is structurally a hybrid — RRSP-style deductibility going in, TFSA-style tax-free withdrawal coming out, but only for first-home purchase qualifying expenses. Most Canadians hold all three account types simultaneously, with contribution-room tracking handled separately for each by the CRA.

CRA notice-of-assessment as the canonical contribution-room source

Each year's CRA Notice of Assessment (issued after the personal income tax return is processed) shows the contribution room available for the following calendar year. The room is calculated from earned income, with the prior year's pension adjustment (if any) deducted, plus any carry-forward from prior years. The figure is binding for CRA purposes — over-contributions above the threshold are penalised at 1% per month until either withdrawn or absorbed by new room becoming available the following year.

The CRA's My Account portal at canada.ca/cra/my-account provides real-time access to contribution-room balances. The mobile app MyCRA also displays the room and recent transactions. For taxpayers without My Account access, the contribution-room figure can be requested from the CRA at 1-800-959-8281 or through the paper Notice of Assessment.

Frequently asked questions

What if my employer provides a registered pension plan?

If you participate in a defined-benefit or defined-contribution registered pension plan (RPP) or deferred profit-sharing plan (DPSP) through your employer, the CRA reports a pension adjustment (PA) on your annual T4 slip. The PA reduces your RRSP room dollar-for-dollar for the following tax year. High-end DB plan participants can have PA values exceeding ,000, effectively zeroing out their RRSP room.

Can I carry forward unused contribution room indefinitely?

Yes. Unlike the TFSA (which also carries forward but with a different mechanism), RRSP contribution room from earned income carries forward indefinitely until you turn 71 (the age at which RRSPs must be converted to a RRIF or annuity). The carry-forward room compounds across years for taxpayers who don't max out their annual room.

How does the over-contribution penalty work?

Over-contributions above ,000 (the lifetime over-contribution allowance) trigger a 1% per-month penalty until withdrawn. The withdrawal itself is taxed at marginal rate (it's a normal RRSP withdrawal). The penalty + withdrawal-tax combination usually outweighs any tax benefit from the over-contribution. See our over-contribution penalties guide for the formal mechanics and CRA Form T1-OVP.

2026 registered-account contribution ceilings — snapshot