Saving for a down payment in Ontario feels like chasing a moving target. Home prices remain elevated, and between rent, groceries, and everyday life, setting aside tens of thousands of dollars can feel impossible. But there's a side of the equation that many first-time buyers don't fully appreciate: the Canadian government offers several programs that let you save for your home with significant tax advantages — and in some cases, withdraw those funds completely tax-free.
When you combine the First Home Savings Account (FHSA), the RRSP Home Buyers' Plan (HBP), and Ontario-specific rebates, a couple could potentially access over $100,000 in tax-advantaged funds for their down payment. That's not a hypothetical number — it's what the programs are designed to deliver when used strategically.
This guide breaks down each program, explains the tax benefits in practical terms, and shows you how to stack them together to get into your first home sooner.
The First Home Savings Account (FHSA)
The FHSA launched in April 2023 and is the most powerful savings tool available to first-time buyers in Canada. It combines the best features of an RRSP and a TFSA: your contributions are tax-deductible (like an RRSP), and qualifying withdrawals to buy your first home are completely tax-free (like a TFSA). No other registered account offers both benefits.
How the FHSA Works
| Feature | Details |
|---|---|
| Annual Contribution Limit | $8,000 per year |
| Lifetime Contribution Limit | $40,000 |
| Carry-Forward Rule | Up to $8,000 of unused room carries forward to the next year (max contribution in any single year: $16,000) |
| Tax Deduction | Contributions are fully deductible from your taxable income, like an RRSP |
| Investment Growth | All investment income (interest, dividends, capital gains) grows tax-free inside the account |
| Qualifying Withdrawal | Tax-free when used to purchase your first home — no repayment required |
| Account Lifespan | Maximum 15 years, or until end of the year you turn 71, or end of the year after your first qualifying withdrawal — whichever comes first |
| Eligibility | Canadian resident, age 18+, have not owned a home you lived in as your principal residence in the current year or previous 4 calendar years |
The Tax Deduction: Real Money Back in Your Pocket
Every dollar you contribute to your FHSA reduces your taxable income dollar-for-dollar. The actual tax savings depend on your marginal tax rate. Here's what that looks like in practice for an Ontario resident:
| Taxable Income Range | Approx. Combined Marginal Rate (Fed + Ont.) | Tax Savings on $8,000 FHSA Contribution |
|---|---|---|
| $55,867 – $73,000 | ~29.65% | ~$2,372 |
| $73,001 – $100,392 | ~31.48% | ~$2,518 |
| $100,393 – $106,717 | ~33.89% | ~$2,711 |
| $106,718 – $155,625 | ~37.91% | ~$3,033 |
Key Point: That Tax Refund Is Extra Down Payment Money
If you earn $90,000 and contribute $8,000 to your FHSA, you'll receive approximately $2,518 back at tax time. That refund can go straight into next year's FHSA contribution — effectively letting the government help fund your down payment. Over several years of doing this, the compounding effect is substantial.
FHSA: No Repayment Required
This is the critical difference between the FHSA and the RRSP Home Buyers' Plan. When you withdraw from your FHSA to buy your first home, you do not need to repay those funds. The money is yours, free and clear. With the RRSP HBP, you must repay the withdrawal over 15 years — or it gets added back to your taxable income. The FHSA has no such requirement.
The RRSP Home Buyers' Plan (HBP)
The Home Buyers' Plan has been around since 1992, and the federal government significantly enhanced it in 2024 by increasing the withdrawal limit from $35,000 to $60,000 per person. For a couple, that's up to $120,000 that can be pulled from your RRSPs tax-free to put toward your first home.
How the HBP Works
| Feature | Details |
|---|---|
| Maximum Withdrawal | $60,000 per person ($120,000 for a couple) |
| Tax Treatment | Withdrawal is not included in taxable income (as long as you repay) |
| Repayment Period | 15 years |
| Annual Repayment | Minimum 1/15th of total withdrawn per year |
| Missed Repayment | The amount you didn't repay is added to your taxable income for that year |
| Eligibility | RRSP funds must have been deposited at least 90 days before withdrawal |
| First-Time Buyer Rule | Cannot have owned a home you lived in as your principal place of residence in the current year or previous 4 calendar years |
The Tax Benefit: Double Deduction Opportunity
Here's a benefit many people overlook: your RRSP contributions are tax-deductible when you make them. When you withdraw under the HBP, the withdrawal itself is tax-free (as long as you repay). That means the government effectively gives you a tax deduction on money you're using for your down payment — you just need to pay it back over 15 years.
If you contribute $60,000 to your RRSP over several years, you receive tax deductions on those contributions (potentially $15,000–$22,000+ in total tax savings depending on your bracket). Then you withdraw the $60,000 tax-free under the HBP. Your annual repayment obligation is $4,000/year ($60,000 ÷ 15) — which is manageable for most households.
Important: The 90-Day Rule
Funds must be in your RRSP for at least 90 days before you can withdraw them under the HBP. If you're planning to buy in the spring, make sure your contributions are deposited by early winter at the latest. Last-minute RRSP deposits won't qualify.
Combining FHSA + HBP: The Maximum Down Payment Strategy
Here's where it gets powerful. The Canadian government allows you to use both the FHSA and the RRSP Home Buyers' Plan for the same qualifying home purchase. There is no rule preventing you from stacking these programs together.
Maximum Combined Amounts (Per Person)
| Program | Maximum Available | Tax on Withdrawal | Repayment Required |
|---|---|---|---|
| FHSA | $40,000 (contributions) + investment growth | Tax-free | No |
| RRSP HBP | $60,000 | Tax-free (if repaid) | Yes — 15 years |
| Total (Individual) | Up to $100,000+ | ||
| Total (Couple) | Up to $200,000+ |
Practical Example: Sarah and James Buy Their First Home
Scenario: Couple buying a $650,000 condo in the GTA
Sarah (age 30, earning $85,000) and James (age 31, earning $78,000) have been saving strategically since 2023.
Sarah's down payment sources:
- FHSA: $24,000 (3 years of contributions) + ~$2,800 investment growth = $26,800
- RRSP HBP withdrawal: $45,000
- Tax refunds received from FHSA/RRSP deductions over 3 years: ~$7,200 (saved separately)
Sarah's total: ~$79,000
James's down payment sources:
- FHSA: $24,000 + ~$2,500 investment growth = $26,500
- RRSP HBP withdrawal: $40,000
- Tax refunds received: ~$6,400
James's total: ~$72,900
- Combined down payment: ~$151,900 (23.4% of $650,000)
- Total tax deductions claimed over 3 years: ~$41,600
- Total tax refunds received: ~$13,600
- Repayment obligation: Only the RRSP HBP portions ($45,000 + $40,000 = $85,000 repaid over 15 years = ~$5,667/year combined). FHSA withdrawals require zero repayment.
This example shows how a couple earning moderate incomes, starting just three years before their purchase, can assemble a 23% down payment on a $650,000 property — with over $13,000 in tax refunds along the way. The FHSA contributions never need to be repaid, and the RRSP repayments are spread over 15 years in manageable installments.
Planning Your First Home Purchase?
The best time to start coordinating your FHSA, RRSP, and mortgage strategy is 12–24 months before you plan to buy. We'll help you understand exactly what you can afford and get you pre-approved when you're ready.
Get Pre-Approved →Ontario-Specific Programs and Rebates
On top of the federal programs, Ontario offers several additional incentives for first-time buyers that directly reduce your upfront costs:
Ontario Land Transfer Tax Rebate
| Detail | Amount |
|---|---|
| Maximum Provincial Rebate | Up to $4,000 |
| Full Rebate Covers Homes Up To | $368,000 purchase price |
| Partial Rebate Available | Yes — on homes above $368,000, you still get the $4,000 rebate applied against the total LTT owing |
| Eligibility | First-time buyer, Canadian citizen or permanent resident, age 18+, must occupy as principal residence within 9 months |
| How to Claim | At closing through your lawyer, or within 18 months via the Ontario Ministry of Finance online portal |
Toronto Municipal Land Transfer Tax Rebate
If you're buying within the City of Toronto, you pay a second land transfer tax (municipal). First-time buyers can receive a rebate of up to $4,475 on this municipal tax. Combined with the provincial rebate, that's up to $8,475 in land transfer tax savings for a first-time buyer purchasing in Toronto.
Federal Home Buyers' Tax Credit (HBTC)
| Detail | Amount |
|---|---|
| Tax Credit Amount | $10,000 non-refundable credit |
| Actual Tax Savings | $1,500 (15% of $10,000 at lowest federal rate) |
| How to Claim | On your personal tax return (Line 31270) for the year you purchased |
| Can Be Split | Yes — you and your spouse/partner can split the $10,000 credit, but total cannot exceed $10,000 |
GST/HST New Housing Rebate
If you're buying a newly constructed home (not resale), you may be eligible for the GST/HST New Housing Rebate, which refunds a portion of the HST paid on the purchase. For homes priced under $350,000, the federal rebate can be up to $6,300. A partial rebate is available for homes between $350,000 and $450,000. Ontario also provides an additional provincial rebate of up to $24,000 on new homes. This rebate can be substantial — talk to your builder and lawyer about whether it applies to your purchase.
The Complete First-Time Buyer Savings Stack
Here's the full picture of every program and benefit available to an Ontario first-time buyer in 2026:
| Program | Max Benefit (Individual) | Max Benefit (Couple) | Type |
|---|---|---|---|
| FHSA Withdrawal | $40,000+ | $80,000+ | Tax-free down payment (no repayment) |
| RRSP Home Buyers' Plan | $60,000 | $120,000 | Tax-free down payment (repay over 15 yrs) |
| Tax Refunds from FHSA/RRSP Deductions | Varies | Varies | Cash back from tax deductions on contributions |
| Ontario LTT Rebate | Up to $4,000 | Closing cost savings | |
| Toronto Municipal LTT Rebate | Up to $4,475 | Closing cost savings (Toronto only) | |
| Home Buyers' Tax Credit (HBTC) | $1,500 tax savings | Claimed on tax return | |
| GST/HST New Housing Rebate | Up to $30,300 (fed + prov.) | New construction only | |
| Potential Total (Couple, Toronto, New Build) | $200,000+ in down payment + $40,000+ in rebates/credits | ||
Strategic Tips: Getting the Most From These Programs
Open Your FHSA as Early as Possible
Even if you can't contribute the full $8,000 right away, opening the account starts the clock on your carry-forward room. If you open the account and contribute $0 in year one, you can contribute up to $16,000 in year two ($8,000 carry-forward + $8,000 current year). The sooner you open it, the more room you accumulate.
Invest Your FHSA — Don't Just Save
Your FHSA can hold the same investments as an RRSP or TFSA — GICs, mutual funds, ETFs, stocks, bonds. If your timeline to purchase is 3+ years, consider investing in a balanced portfolio rather than leaving funds in a savings account. All growth inside the FHSA is tax-free. Even modest returns of 5–6% annually can add thousands to your down payment over a few years.
Reinvest Your Tax Refunds
When you get your tax refund from FHSA and RRSP contributions, don't spend it. Deposit it into a separate savings account earmarked for your down payment. Over three to five years of contributions, those refunds can add up to $10,000–$20,000+ for a couple. That's real money that closes the gap.
Coordinate RRSP Contributions With the 90-Day Rule
If you plan to use the HBP, make sure your RRSP contributions are deposited at least 90 days before you need to withdraw. If you're planning to buy in May, your last eligible RRSP deposit would need to be made by February at the latest. Plan ahead — last-minute contributions won't qualify.
Don't Forget: You Still Need Funds for Closing Costs
Your down payment isn't your only upfront expense. Budget 1.5–4% of the purchase price for closing costs, which include land transfer tax (after rebates), legal fees, home inspection, title insurance, and potential adjustments. On a $600,000 purchase in Ontario, closing costs typically range from $10,000 to $20,000 depending on your location and whether you're buying in Toronto.
Frequently Asked Questions
Can I use both the FHSA and the RRSP Home Buyers' Plan for the same home purchase?
Yes. The Government of Canada explicitly allows you to make qualifying withdrawals from both your FHSA and your RRSP (under the HBP) for the same qualifying home, as long as you meet the eligibility conditions for each program at the time of withdrawal.
What happens to my FHSA if I don't end up buying a home?
If you don't use your FHSA to purchase a qualifying home, the account must be closed by the end of its 15th year (or the year you turn 71, whichever comes first). At that point, remaining funds can be transferred to your RRSP or RRIF without affecting your RRSP contribution room, or withdrawn as taxable income. You don't lose the money — but you will owe tax on it if you withdraw rather than transfer.
Do I qualify as a “first-time buyer” if I owned a home years ago?
You may still qualify. For both the FHSA and the HBP, the definition of a first-time buyer is someone who has not owned a home they lived in as their principal place of residence in the current calendar year or the previous four calendar years. If you owned a home more than four years ago and haven't owned since, you may qualify again. Consult with a tax professional to confirm your eligibility.
Can I contribute to my FHSA and my RRSP in the same year?
Yes. FHSA contribution room is completely separate from your RRSP contribution room. Contributing $8,000 to your FHSA does not reduce your RRSP room, and vice versa. You can maximize both in the same year, and both contributions are tax-deductible.
What if I miss an RRSP Home Buyers' Plan repayment?
If you don't make the required repayment in a given year, the amount you should have repaid is added to your taxable income for that year. For example, if your annual repayment obligation is $4,000 and you repay $0, an additional $4,000 is included in your income on your tax return. It's not a penalty per se — but it does increase your tax bill for that year.
Is there an income limit for these programs?
There is no income limit for the FHSA, the HBP, or the Ontario land transfer tax rebate. However, the GST/HST New Housing Rebate phases out for homes priced above $350,000 (federal portion) and the provincial portion has its own thresholds. Your income level does affect the value of the tax deduction — higher income means a higher marginal rate and a larger refund on the same contribution amount.
The Bottom Line
The path to homeownership in Ontario is more affordable than many first-time buyers realize — when you use the programs available to you strategically. The FHSA alone can put $40,000+ toward your down payment with full tax deductions on the way in and zero tax on the way out. Add the RRSP Home Buyers' Plan at $60,000 per person, and a couple is looking at over $200,000 in tax-advantaged purchasing power before any other savings.
Layer on the Ontario land transfer tax rebate ($4,000), the Toronto municipal rebate ($4,475 if applicable), the federal Home Buyers' Tax Credit ($1,500), and potentially the GST/HST New Housing Rebate for new construction, and the total benefit package becomes significant.
The key is starting early — even if you're 2–3 years away from buying. Open your FHSA now to start building contribution room. Coordinate with your mortgage broker and your accountant to ensure your savings strategy, tax strategy, and mortgage qualification strategy are all working together. That's the difference between feeling like homeownership is out of reach and having a clear, funded plan to get there.
Amit Mistry is the Principal Broker at Newcastle Financial Corporation (FSRA Licence #13522), serving homebuyers across Toronto, Mississauga, and all of Ontario. Have a question about this topic or your mortgage options? Call (647) 646-6523 or book a free consultation.