Why saving is the real first step
Most people imagine the path to buying a home begins with browsing listings. It actually begins with two quieter decisions made much earlier: where you park your savings, and how much you'll need. Get those right and the rest of the journey — mortgages, offers, closing — becomes a series of manageable steps. Get them wrong, or start late, and you can lose thousands in avoidable tax and miss out on free contribution room you can never get back.
The encouraging part: Canada has built two registered accounts specifically to help first-time buyers, and they're among the most generous tax tools in the system. If you're renting now and think you might buy someday, opening the right account this year — even with a small contribution — is the single highest-value move you can make. Here's how each works.
The FHSA: the account built for first homes
The First Home Savings Account (FHSA) is a registered account designed for one purpose: saving for your first home. It blends the best features of two other accounts — like an RRSP, your contributions are generally tax-deductible (lowering your taxable income); like a TFSA, a qualifying withdrawal to buy a home, including any growth, comes out tax-free.[1] That combination is unusual and powerful.
The numbers, as of 2026: you can contribute up to $8,000 per year, to a $40,000 lifetime limit.[1] To open one you must be an adult resident of Canada and a first-time home buyer — meaning you haven't lived in a home you owned (or jointly owned) in the current year or the prior four calendar years.[2] Eligibility is based on home-ownership status, not income — there's no income cap.[3]
Two features reward starting early. First, carryforward: if you don't use your full $8,000 in a year, up to $8,000 of unused room carries to the next year — so someone who contributes nothing in their first year can put in up to $16,000 the next.[1] Second, unlike the Home Buyers' Plan below, FHSA withdrawals never have to be repaid.[3] The money, and its growth, is simply yours for the home.
⚠ Don't over-contribute
The annual and lifetime limits are firm. Contributing more than your participation room creates an "excess amount" that can be taxed, eroding the very benefit you're after.[4] The CRA reports your available room on your notice of assessment and in your CRA account — check it before contributing, especially if you hold more than one FHSA (multiple accounts don't give you extra room).[4]
The Home Buyers' Plan: borrowing from your own RRSP
The Home Buyers' Plan (HBP) is the older tool, and it works differently. Rather than a dedicated account, it lets you withdraw from your existing RRSP to buy or build a qualifying first home — currently up to $60,000 per person.[5] The key distinction from the FHSA: this is a loan to yourself. The withdrawal is tax-free only if you repay it to your RRSP over time, on a set schedule. Miss a year's repayment and that portion is added to your taxable income. You generally have up to 15 years to repay the amount withdrawn under the Home Buyers' Plan.[5]
So the FHSA gives you money that's yours to keep; the HBP gives you access to retirement savings you must pay back. Both have their place, and for many first-time buyers the strongest strategy is to use them together.
Using both together
You can combine an FHSA withdrawal and an HBP withdrawal for the same qualifying home purchase.[5] Stacked, the two accounts can contribute a substantial down payment — and if you're buying with a partner who also qualifies, each of you has your own limits.
FHSA
A gift to yourself- Contribution
- Up to $8,000/year, $40,000 lifetime
- Tax on contribution
- Deductible (lowers taxable income)
- Tax on withdrawal
- Tax-free for a qualifying home
- Repayment
- None — the money is yours
Home Buyers' Plan
A loan from yourself- Withdrawal
- Up to $60,000 from your RRSP
- Source
- Existing RRSP savings
- Tax on withdrawal
- Tax-free if repaid on schedule
- Repayment
- Required, over time, back into your RRSP
A common, effective sequence: open an FHSA as early as you can to start the clock and bank contribution room, contribute what you can each year for the deduction and tax-free growth, and plan to layer in an HBP withdrawal from your RRSP when you're ready to buy. Because limits and rules shift, confirm the current figures and your own eligibility on the CRA pages before you build a plan around them.[2]
Down payment rules: the tiered minimum
Now the number you're actually saving toward. The minimum down payment in Canada is not a flat percentage — it rises with the price of the home:[6]
| Purchase price | Minimum down payment |
|---|---|
| $500,000 or less | 5% of the purchase price |
| $500,000 to $1,499,999 | 5% on the first $500,000, plus 10% on the portion above $500,000 |
| $1,500,000 and above | 20% minimum; federally backed mortgage insurance is not available |
There's a crucial second rule attached. Any purchase with less than 20% down legally requires mortgage default insurance — from CMHC or a private insurer. This insurance protects the lender (not you) if you stop paying, and the premium is typically added to your mortgage balance.[7] It's the mechanism that lets buyers enter with as little as 5% down,[7] but it's a real cost, and reaching 20% avoids it entirely. So your savings target isn't just "the minimum" — it's a judgment about how much insurance you're willing to carry.
Worked example: a $600,000 home
At this down payment (under 20%), mortgage default insurance would apply and be added to the loan. To avoid insurance entirely on a $600,000 home, you'd need 20% — $120,000. Illustrative only; confirm current rules with CMHC.
Saving beyond the down payment
The most common beginner mistake is saving for the down payment alone. Closing a home purchase carries extra one-time costs — often in the range of a few percent of the price — that must be paid in cash on top of your down payment. Build these into your savings goal from the start:
Land/property transfer tax
Charged by most provinces (and some municipalities) when a property changes hands. First-time buyer rebates exist in several provinces — covered in a later guide.
Legal fees
A lawyer or notary handles the closing, title transfer, and registration.
Home inspection & appraisal
Money well spent to confirm what you're buying and satisfy the lender.
Adjustments & moving
Reimbursing the seller for prepaid property tax or utilities, plus moving costs and any immediate repairs.
A practical buffer: aim to save your target down payment plus a closing-cost cushion, and ideally a little beyond for the first months of ownership. We break the full closing bill down in a dedicated guide — for now, just know the down payment is the headline number, not the whole bill.
Your saving-for-a-home checklist
Start the clock on your first home
Tick as you go — it saves your progress.
Saving for a home is the least glamorous part of the journey and the one that matters most. The renter who opens an FHSA this year, contributes steadily, and saves with the full bill in mind — not just the down payment — arrives at the buying stage years ahead of the one who waits until they're ready to shop. When you are ready to borrow, the next guide explains how mortgages actually work.
Sources & further reading
- Canada Revenue Agency, "First Home Savings Account (FHSA)" — registered account combining tax-deductible contributions and tax-free qualifying withdrawals; up to $8,000 per year to a $40,000 lifetime limit; up to $8,000 of unused room carries forward. canada.ca — CRA FHSA
- Canada Revenue Agency, "Who can open an FHSA" — must be an adult resident of Canada and a first-time home buyer (not having lived in a home you owned or jointly owned in the current year or the prior four calendar years). canada.ca — opening an FHSA
- Canada Revenue Agency, "Making qualifying withdrawals from your FHSAs" — a qualifying withdrawal to buy or build a first home (including any growth) is tax-free and does not have to be repaid; FHSA eligibility is based on first-time-home-buyer and residency status, not income. canada.ca — FHSA qualifying withdrawals
- Canada Revenue Agency, "Contributing to your FHSAs" — the $8,000 annual and $40,000 lifetime FHSA limits are firm; contributing beyond your participation room creates a taxable "excess amount"; holding more than one FHSA does not increase your room; the CRA reports your participation room on your notice of assessment and in My Account. canada.ca — contributing to your FHSAs
- Canada Revenue Agency, "What is the Home Buyers' Plan (HBP)?" — withdraw up to $60,000 from your RRSP for a qualifying first home; tax-free only if repaid to your RRSP on schedule; can be combined with an FHSA withdrawal for the same purchase. canada.ca — CRA HBP
- CMHC — minimum down payment is tiered: 5% on the first $500,000, plus 10% on the portion above $500,000 for homes priced $500,000 to $1,499,999, and 20% at $1,500,000 and above (where federally backed insurance is unavailable). Confirm current thresholds on CMHC. cmhc-schl.gc.ca — homebuying step by step
- CMHC, "Mortgage Loan Insurance Explained" — mortgage default insurance is required when the down payment is under 20%, protects the lender, is added to the mortgage, and enables down payments as low as 5%. cmhc-schl.gc.ca — mortgage loan insurance
Comments