Three smart savings strategies to help you build your down payment faster

Buying your first home is an exciting milestone, but saving for a down payment can feel challenging. The good news? Canadians have access to several tax-advantaged savings options that can help make homeownership more achievable.

By strategically combining a First Home Savings Account (FHSA), Registered Retirement Savings Plan (RRSP), and Tax-Free Savings Account (TFSA), you can reduce your income taxes, grow your savings, and make every dollar work harder toward your first home.

The key is knowing where to start.

1. Start With an FHSA – Your First Savings Priority

For many eligible first-time homebuyers, an FHSA may be a valuable starting point because it combines tax-deductible contributions with tax-free qualifying withdrawals.

An FHSA combines two valuable tax advantages: contributions are generally tax-deductible, similar to an RRSP, while qualifying withdrawals to purchase your first home are completely tax-free, similar to a TFSA.

You can contribute up to $8,000 annually, subject to your available contribution room, with a lifetime contribution limit of $40,000.

Why opening your FHSA early matters

Unlike an RRSP or TFSA, FHSA contribution room only begins accumulating once you open your first account.

Even if you're not ready to contribute the full amount, opening an FHSA now can help establish valuable contribution room for future years.

For example, if you open an FHSA in 2026 but make no contributions, you could have up to $16,000 of available contribution room in 2027.

That's because you can carry forward up to $8,000 of unused FHSA participation room to the following year.

Important: An FHSA generally has a maximum participation period of 15 years. Consider your expected home purchase timeline before opening an account.

2. Next, Consider Your RRSP – Save on Taxes While Building Your Down Payment

Once you've maximized your available FHSA contribution room, consider directing additional savings to your Registered Retirement Savings Plan (RRSP).

RRSP contributions may reduce your taxable income, depending on your circumstances and available deduction room.

Better yet, the Home Buyers' Plan (HBP) allows eligible first-time homebuyers to withdraw up to $60,000 from their RRSP to help purchase a qualifying home.

You can use your FHSA and HBP together for the same home purchase, potentially providing a substantial source of funds for your down payment.

There is one important difference: unlike qualifying FHSA withdrawals, money withdrawn through the HBP must generally be repaid to your RRSP over 15 years. Contributions generally must remain in the RRSP for at least 90 days before withdrawal to preserve their deductibility.

3. Put Your Tax Refund to Work in a TFSA

Here's where your savings strategy becomes even more powerful.

Rather than spending the income tax refund generated by your FHSA and RRSP contributions, consider investing it in a Tax-Free Savings Account (TFSA).

Although TFSA contributions aren't tax-deductible, investment earnings and withdrawals are generally tax-free.

Your TFSA can provide additional savings for your down payment, closing costs, moving expenses, or unexpected costs associated with homeownership.

Unlike the HBP, TFSA withdrawals do not need to be repaid.

See How Your Savings Can Add Up

Consider a first-time homebuyer with a 30% marginal income tax rate who makes the following contributions:

In this example, reinvesting the estimated $3,900 in tax savings could increase the amount set aside for a first home from $13,000 to $16,900, before investment gains or losses.

This simplified illustration assumes sufficient contribution room, full deductions claimed, sufficient taxable income and taxes payable, and no investment gains or losses. The $3,900 represents estimated income tax savings, not an additional government contribution.

By reinvesting your tax savings instead of spending them, you could increase the amount you've set aside for your first home by 30% in this example.

Start Early. Save Strategically. Get Closer to Homeownership.

You don't need to have your entire down payment saved before getting started.

Opening the right accounts, contributing consistently, and taking advantage of available tax deductions can make a meaningful difference over time.

Whether you're planning to purchase your first home next year or several years from now, a coordinated FHSA, RRSP, and TFSA savings strategy can help you make the most of your money.

Thinking about buying your first home? Speak with your financial advisor about developing a savings strategy tailored to your income, timeline, and homeownership goals.

This article provides general information only. Eligibility requirements, contribution limits, tax circumstances, and withdrawal rules vary. Consult a qualified financial or tax advisor regarding your individual situation.