FHSA vs HBP vs TFSA - which one to use when saving for the down payment of a home?

March 13, 2024

Saving for the down payment of a home is one of the fundamental pieces of the puzzle that lead to home ownership, but where to start is a question that many ask themselves. Over the years, the Government of Canada has introduced many savings programs that have proven to be helpful when saving for the down payment of a first home. These include the First Home Savings Account (FHSA), the Home Buyers Plan (HBP) and the Tax-Free Savings Account (TFSA). Each has its own specific features and benefits that make it worth considering. An individual does not necessarily need to choose just one of these three savings program options but can use them together to complement each other.

First Home Savings Account (FHSA)

The FHSA account was introduced in April 2023 by the Government of Canada. It is a registered plan that assists first-time home buyers to save to buy or build a qualifying first home, tax-free.

Read more about FHSA

Home Buyers’ Plan (HBP)

The HBP is a program that allows individuals to withdraw from their registered retirement savings plans (RRSPs) to buy or build a qualifying home for themselves or a specified disabled person.

• withdrawals up to $35,000 can be made from an RRSP to buy or build a qualifying home
• the RRSP holder must be considered a first-time homeowner, however if the withdrawal is for a specified disabled person this condition does not apply
• the issuer does not apply withholding taxes and the withdrawal is not taxable income in the year removed
• multiple withdrawals can be made in the same calendar year or January of the following year
• the HBP withdrawals must be repaid within 15 years
• first repayment begins the second year after the year the first withdrawal, 1/15 of the withdrawal amount is expected each year
• in any given year the repayment amount is not made back into the RRSP it considered taxable income in that year

Tax-Free Savings Account (TFSA)

The TFSA is a general-purpose investment account introduced in 2009. Individuals who are 18 years of age or older and have a valid social insurance number (SIN) can utilize this investment account to set money aside tax-free throughout their lifetime.

Read more about the TFSA

At-A-Glance Comparison: FHSA, HBP and TFSA

The Government of Canada has provided many savings strategies for first-time homeowners to save for the down payment of a home. At first glance, they can seem overwhelming and may stop you from beginning to save for the down payment of a home and achieving your dream of home ownership. It is essential to understand all the features and benefits of each savings strategy to ensure they are utilized to their fullest potential. Speak with your financial advisor who can guide you and set you on the path of home ownership.

FirstOntario Credit Union in partnership with Credential Securities and Credential Asset Management Inc. has an experienced team of advisors specializing in various areas of wealth management including retirement planning, investment management, estate and succession planning, individual financial risk management and more. These professionals are here to help you plan for the future and reach your financial goals. Visit FirstOntario.com/Investments or call 1-800-616-8878 ext. 1700 to connect with a FirstOntario advisor and start growing your wealth today – your way.

Mutual funds are offered through Credential Asset Management Inc. The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This should be considered as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds. The views expressed are those of the writer and not necessarily those of Credential Asset Management Inc.