FHSA vs RRSP Home Buyers’ Plan: which to use first

The two plans side by side

With an FHSA, you contribute to a registered account, generally deduct the contribution, and later withdraw the property tax-free if you meet the qualifying withdrawal conditions. You do not repay it. Participation room is $8,000 in the year you open your first FHSA, the lifetime deduction limit is $40,000, and the account has a maximum participation period of up to 15 years from opening.

With the HBP, you withdraw from RRSPs you already hold, up to $60,000, to buy or build a qualifying home, and the withdrawal is not taxed if you follow the rules. You must then repay the amount to your RRSP over 15 years. The HBP does not need a new account, which makes it the natural tool for savings you already have inside an RRSP.

Who qualifies for each

Both plans use a first-time home buyer test with a similar look-back. In general, you must not have lived in a qualifying home that you owned, or that your spouse or common-law partner owned, as your principal place of residence in the current calendar year or the previous four. The exact wording differs between opening an FHSA, making an FHSA withdrawal and making an HBP withdrawal, so check each one rather than assuming a single answer.

To open an FHSA you must also be a Canadian resident, at least 18 (19 where that is the legal age of contract in your province) and 71 or younger at the end of the year you open it. For the HBP you need a written agreement to buy or build, residency from your first withdrawal until you acquire the home, and an intention to occupy it as your principal residence within one year. A pre-approved mortgage is not a written agreement. The HBP has exceptions for certain disabled persons and for people recently separated; the FHSA withdrawal rules are not identical, so ask about your own situation.

Getting money in, and the deduction question

FHSA contributions can be deducted for the year you make them or a later year, and unused contributions can be carried forward. Unlike an RRSP, a contribution in the first 60 days of a year cannot be deducted for the previous year. For a 2026 deduction, the contribution has to be made by December 31, 2026. Contributions made after your first qualifying withdrawal cannot be deducted in any year.

Moving money from an RRSP to an FHSA by direct transfer, using Form RC720, is allowed but is not deductible, counts against your FHSA room and does not restore RRSP room. Withdrawing from the RRSP and depositing the money yourself is not a direct transfer: it is taxable RRSP income and counts as a contribution. Under the HBP, you can deduct RRSP contributions in the usual way, but contributions made in the 89 days before an HBP withdrawal may be partly non-deductible if the RRSP’s value after the withdrawal is lower than those contributions.

Taking money out, and paying it back

For an FHSA qualifying withdrawal, you give your issuer Form RC725. You need a written agreement to buy or build, the home must be acquired or completed before October 1 of the year after the withdrawal, and you must not have acquired it more than 30 days before withdrawing. You must also intend to occupy it within a year. A qualifying withdrawal cannot be cancelled once made, and putting the money back counts as a new, non-deductible contribution.

For the HBP, you file Form T1036 with your RRSP issuer for each withdrawal, within the same calendar year as the first one or the following January. If your first withdrawal falls between January 1, 2026 and December 31, 2028, the 15-year repayment period begins in the fifth year after the withdrawal, so a 2026 withdrawal starts repaying in 2031. The minimum is your balance divided by the years remaining. As an illustration, $30,000 over 15 years is $2,000 a year. A shortfall is added to your income for that year, and repayments cannot be made into an FHSA.

Using both for the same home

The CRA confirms that you can make an HBP withdrawal and an FHSA qualifying withdrawal for the same qualifying home, provided you meet all the conditions at the time of each. As an illustration, someone with $20,000 in an FHSA and $25,000 of RRSP savings could use both toward one purchase, with the FHSA portion needing no repayment and the HBP portion going on the repayment schedule.

If you buy with a partner, the CRA says each person can make a qualifying withdrawal from their own FHSA, as long as each meets the conditions. Each person’s room and records stay separate, because only the holder can participate in or deduct for their own FHSA.

A sensible order to think it through

If you qualify, opening an FHSA early can matter. The 15-year period runs from the date you open your first account even if you contribute nothing, and the first-year room of $8,000 is the starting point for later carry-forward. When you open it, you file Schedule 15 with that year’s return, even with no activity, so the CRA knows the account exists.

After that, the decision usually turns on cash flow. If you have income to shelter and cash to save, FHSA contributions give a deduction and no repayment. If your savings already sit in an RRSP, the HBP gives access without a new deposit, at the cost of an annual repayment. Moving RRSP money into an FHSA gives no FHSA deduction and does not restore your RRSP room. A home purchase date that is only a few months away often leaves less choice than one that is a few years away, so the answer depends on timing. This is general information, not a recommendation.

Mistakes to avoid

A frequent FHSA error is exceeding room by combining contributions and RRSP transfers. Room covers both together, across every FHSA you hold, and an excess is taxed at 1% a month on the highest excess in each month, with a return due by June 30 of the following year. Other mistakes include buying more than 30 days before the withdrawal, missing the October 1 deadline, and forgetting to close the FHSA or transfer it to an RRSP or RRIF before the maximum participation period ends, which can create taxable income.

For the HBP, skipping a repayment is the main risk. Designate the repayment on Schedule 7 when you file, and keep filing until the balance is cleared. Check your HBP balance on the CRA statement that comes with your notice of assessment. If you are also comparing RRSP and TFSA saving, see our article on which to use first.

What to bring to your accountant

Bring your latest notice of assessment, the RRSP and FHSA participation room statements, any T1028, issuer statements for every account, the written purchase agreement with its closing date, and a list of recent RRSP contributions. If you own a corporation, bring a note on how you pay yourself, because earned income affects RRSP room. Ontario-specific home buying costs and credits sit outside this article, so raise them separately.