Saving for a Home in Canada: FHSA, Home Buyers' Plan, and Down Payments

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.

Decision map

Compare the routes before reading deep

FHSA

Official source

Best forTax-deductible first-home saving Needs lender?No PhaseBefore shopping SourceCRA Last verifiedJune 2026

Home Buyers' Plan

Official source

Best forUsing eligible RRSP savings Needs lender?No PhaseBefore closing SourceCRA Last verifiedJune 2026

Minimum down payment

Official source

Best forTesting the purchase price ceiling Needs lender?Later PhaseBudget check SourceCMHC Last verifiedJune 2026

Cash-to-close reserve

Official source

Best forAvoiding closing-week surprises Needs lender?Sometimes PhaseBefore offer SourceFCAC/CMHC Last verifiedJune 2026

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 highest-value move available to you. 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.

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.

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]

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.

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:

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. Closing Costs & Hidden Expenses breaks the full bill down — for now, just know the down payment is the headline number, not the whole bill.

Your saving-for-a-home checklist

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, Mortgages 101 explains how the loan itself actually works.