If you are saving for your first home in Canada, you have three tax-sheltered accounts pulling at the same dollar: the FHSA, your RRSP through the Home Buyers’ Plan, and your TFSA. The good news is the real question is rarely which one — it is usually which order, because you are allowed to use more than one for the same purchase.
This post explores how the three compare for a down payment specifically, the one catch that separates them, and a common order first-time buyers start from. For the rules of each account on their own, the FHSA explainer and the TFSA guide go deeper; here we are just deciding between them.
The one difference that decides the order
All three accounts grow tax-sheltered, so the deciding factors are what happens on the way in (do you get a deduction?) and on the way out (is the withdrawal taxed, and do you have to pay it back?). Here is the down-payment view:
| For a down-payment dollar | FHSA | RRSP (Home Buyers’ Plan) | TFSA |
|---|---|---|---|
| Deduction going in? | Yes | Yes | No |
| Withdrawal taxed? | No (qualifying home) | No (up to the cap) | No |
| Have to repay it? | No | Yes — over 15 years | No |
| Max toward a home | $40,000 lifetime | $60,000 (HBP) | Your room |
| Locked to a first home? | Yes | Yes (for the HBP) | No — any goal |
Read down the “have to repay it” row and the order almost writes itself. The FHSA is the only account that gives you the deduction and a tax-free withdrawal and asks for nothing back. That is why, dollar for dollar, it is usually the most efficient place to put down-payment money first.
Why the FHSA usually goes first
The FHSA borrows the best half of each of the other two accounts: the up-front deduction of an RRSP and the tax-free, no-strings withdrawal of a TFSA. Nothing else does both. You can put in up to $8,000 a year to a $40,000 lifetime maximum, deduct it from your income, let it grow tax-free, and withdraw the whole thing — growth included — for a qualifying first home with no tax and no repayment.
There is also a quieter reason to open one early even if you can only spare a little: your FHSA carryforward room only starts building after the account exists, and the contribution deadline is December 31 with no 60-day grace period. Opening it gets the clock started. (The mechanics are in the FHSA explainer, and you can put your own income into the FHSA Optimizer to see the refund and growth.)
Where the RRSP Home Buyers’ Plan fits
The RRSP enters this through the Home Buyers’ Plan (HBP), which lets a first-time buyer withdraw up to $60,000 from an RRSP tax-free toward a home. That is more raw room than the FHSA — useful if your down payment is large or you have already maxed the FHSA’s $40,000.
The catch is in the name: it is a plan, not a gift. Every dollar has to go back into your RRSP over 15 years (repayment normally starts the second year after you withdraw). Miss a year’s repayment and that portion is added to your taxable income. On a full $60,000 withdrawal that is about $4,000 a year flowing back into your RRSP for a decade and a half — money that is not available for anything else.
So the HBP is best thought of as the second lever: reach for it when the FHSA is full and you need more, with eyes open about the repayment. And you do not have to choose — the CRA explicitly lets you stack a qualifying FHSA withdrawal and an HBP withdrawal toward the same home.
Where the TFSA fits
The TFSA is the flexible one. No deduction going in, but the withdrawal is tax-free, there is nothing to repay, and — unlike the other two — the money is not locked to a first home. If your plans change, TFSA savings are still yours for anything.
That flexibility is exactly why it often sits after the FHSA for a committed buyer: you give up the deduction the FHSA would have given you. But the TFSA shines in two cases — when your home plans are genuinely uncertain, and when you are in a low tax bracket where the FHSA/RRSP deduction is not worth much yet.
A common order to fill them
For a first-time buyer who is fairly sure they are buying, the math most often points to this priority — but treat it as a starting point to pressure-test against your own situation, not a rule:
- FHSA first, up to $8,000 a year / $40,000 lifetime — the only deductible-in, tax-free-out, no-repayment account.
- Then the RRSP Home Buyers’ Plan if you need more than the FHSA holds and have the RRSP room — remembering the 15-year repayment.
- TFSA for anything beyond that, or as the main account if your plans are uncertain.
When does this order change? A few honest cases:
- You are in a low bracket now. The FHSA deduction is worth more later. A common move is to contribute to the FHSA now (to start the room and the clock) but carry the deduction forward and claim it in a higher-income year. The TFSA, with no deduction to waste, is also a natural fit for a low-income year.
- Your plans might change. The TFSA’s no-strings flexibility is worth more when “first home” is a maybe, not a when.
- You have a partner. First-time-buyer status is per person, so two qualifying buyers can each open an FHSA and each use the HBP — doubling the room on the same home.
A quick dollar example
Say you are in a 30% marginal tax bracket and put $8,000 into one account for a year (assumptions kept simple to compare like with like — your own rate and timeline change the figures):
- FHSA: $8,000 in, roughly a $2,400 tax refund, and the full balance comes out tax-free for a qualifying home — with nothing to repay. The effective cost of that $8,000 contribution is about $5,600.
- RRSP / HBP: the same ~$2,400 refund and a tax-free withdrawal up to the $60,000 cap — but you repay what you withdraw to your RRSP over 15 years, or the missed amount is taxed.
- TFSA: no refund, but the $8,000 plus its growth is yours tax-free for any purpose, with nothing to repay.
The $2,400 gap in year one is the FHSA’s (and RRSP’s) edge over the TFSA on tax — and the “nothing to repay” line is the FHSA’s edge over the RRSP. To run this across several years on your real income and down-payment goal, the FHSA Optimizer projects all four side by side.
Bottom line
For most first-time buyers, the order that falls out of the rules is FHSA, then the RRSP Home Buyers’ Plan if you need more room, then the TFSA — and you can combine them on the same purchase. The FHSA leads because it is the only one that is deductible going in, tax-free coming out, and free of any repayment. The TFSA earns its place when flexibility matters more than the deduction, and the HBP when you simply need more than $40,000. None of this is one-size-fits-all, so put your own numbers through the FHSA Optimizer and see the gap in dollars. The full FHSA guide gathers the account, the optimizer, and these comparisons in one place.
Sources
- Canada Revenue Agency, First Home Savings Account (FHSA) — eligibility and the $8,000 / $40,000 limits.
- Canada Revenue Agency, Withdrawals and transfers out of your FHSAs — the tax-free qualifying withdrawal.
- Canada Revenue Agency, The Home Buyers’ Plan — the $60,000 limit, the 15-year repayment, and combining the HBP with an FHSA.
- Canada Revenue Agency, The Tax-Free Savings Account (TFSA) — contribution room and tax-free withdrawals.
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