The first-home money stack

The order matters as much as the amount

If you are saving for your first home in Canada, you have three government programs working in your favour. Used together, a couple can move up to $200,000 of tax-advantaged money toward a down payment. Used in the wrong order, you can leave a tax deduction unclaimed or saddle yourself with a repayment you did not need.

This is the plain-language version: what each program does, the order that usually makes sense, and the small print that actually matters. None of this is advice on what to buy. It is how the accounts work, so you can make the call that fits your situation.

The three pieces

1. The First Home Savings Account (FHSA). This is the newest tool, and for most first-time buyers it is the place to start. You can contribute up to $8,000 a year, to a $40,000 lifetime limit. You get a tax deduction on the way in, the same as an RRSP. The money grows tax-free. And when you buy a qualifying first home, you pull it out completely tax-free, with nothing to repay. It is the one account that combines the RRSP's deduction with the TFSA's tax-free withdrawal.

That deduction is real money in the year you contribute. A quick example:

(Rates are illustrative; yours depend on your income and province.) That is a refund the Home Buyers' Plan does not hand you as cleanly, and it is on top of the tax-free withdrawal later.

2. The Home Buyers' Plan (HBP). This lets you borrow from your own RRSP toward a first home. The limit is $60,000 per person (raised from $35,000 for withdrawals after April 16, 2024). There is no tax when you take it out, but it is a loan from your future self: you repay it to your RRSP over 15 years. Miss a year's repayment and that portion gets added to your taxable income.

3. The First-Time Home Buyers' Tax Credit. A non-refundable credit you claim in the year you buy, on line 31270 of your tax return. It applies to up to $10,000 at the lowest federal rate, for a credit worth up to $1,500. It is separate from the other two, and the easiest one to forget. You can claim it in the same year you use the FHSA and the HBP.

Why the FHSA usually comes first

The FHSA and the HBP can both deduct from your income on the way in. The difference is what happens on the way out.

An FHSA withdrawal for a qualifying home is permanent and tax-free. There is nothing to pay back. An HBP withdrawal is tax-free now, but you owe it back to your RRSP over 15 years, and every dollar you pull is a dollar that stops growing tax-deferred until you replace it.

So for most younger first-time buyers, the sensible order while you are saving is:

1. Fill the FHSA first. Deduction now, tax-free growth, tax-free withdrawal, no repayment.
2. Top up the RRSP next, if you have deductible income beyond what the FHSA absorbs. This is what later funds an HBP withdrawal.
3. Use a TFSA after that for any surplus. No deduction, but fully flexible.

When you actually buy, the withdrawal order reverses: take the FHSA first (free and final), use the HBP only if you need more, then the TFSA, then plain cash last.

How a couple gets to $200,000

This is where the stack does real work in an expensive market. Each program is per person, so two qualifying buyers can double everything:

At the top end, both partners fully funding both accounts, that is enough to cover a full 20% conventional down payment on a home of roughly $1 million, which is the conversation a lot of buyers in Vancouver and the Lower Mainland are having. Most households will land below this maximum, and that is fine; the point is that the decision stops being "FHSA or HBP" and becomes "how much from each."

The small print that trips people up

You have to be a first-time buyer, and the test looks back four years. For all three programs, you generally cannot have lived in a home you (or your current spouse or partner) owned as your principal residence in the current year or the previous four calendar years. A spouse's recent ownership counts against you even if you never owned. A home you owned abroad counts too.

The FHSA clock starts when you open it, not when you contribute. Your $8,000 of room only begins building once the account exists. Unused room carries forward, but only up to $8,000, so the most you can put in any single year is $16,000. The practical takeaway: open the FHSA early, even with a small or zero deposit, to start the clock. If you do not buy within the 15-year window (or by the year you turn 71), the balance rolls into your RRSP tax-free, without using RRSP room, so the money is never trapped.

The HBP has an 89-day rule. Money you contribute to your RRSP in the 89 days before an HBP withdrawal may not be deductible. So the move of "dump cash into the RRSP and pull it straight back out under the HBP" does not work cleanly. If you want to top up the RRSP to fund a larger HBP withdrawal, the contribution needs to sit for at least 89 days first.

There is no spousal FHSA. Each person opens their own and claims their own deduction. A higher-earning partner can gift cash to the other, who then contributes it to their own FHSA. That is worth doing mainly when the receiving partner has income to use the deduction against.

You can claim the $1,500 credit on top of everything else. The First-Time Home Buyers' Tax Credit is independent of the FHSA and the HBP. Same purchase, same year, all three can apply. If your own tax bill is too low to use the full credit, it can be split with an eligible co-buyer so it is not wasted.

What if your plans change

A common worry: what if you save in an FHSA and then do not buy, or your life goes a different direction? The money is not stuck. If you do not buy a home within the FHSA's 15-year window (or by the year you turn 71), the full balance rolls into your RRSP, tax-free, and without using up any of your RRSP contribution room. In other words, the worst case is that your first-home savings quietly become extra retirement savings. That makes opening one a low-risk decision even if your plans are not settled.

Where to start

If a first home is on your horizon, the single highest-leverage thing you can do today is open an FHSA, even before you are ready to fund it, to start the contribution clock. From there it is a question of how much to save where, in what order, and how to time the HBP if you use it. That is the kind of question a plan should answer for your actual numbers, not a generic rule of thumb.

If you want this mapped to your own numbers, that is what Your Pocket Planner is built to do: take the guesswork out of decisions like this one, in plain language, alongside any accountant or advisor you already work with.

If you have any questions about any of this, just reach out. We're here to help.

- The team at Your Pocket Planner