Saving a down payment is usually the single biggest hurdle to buying a first home. Canada has two tax-advantaged programs specifically designed to help, and you can use them together.
How Much Do You Actually Need?
Minimum down payment in Canada is 5% on the portion of the purchase price up to $500,000, and 10% on the portion between $500,000 and $1.5 million. On a $600,000 home, that's 5% of the first $500,000 ($25,000) plus 10% of the remaining $100,000 ($10,000), for a minimum of $35,000.
The FHSA (First Home Savings Account)
Introduced in 2023, the FHSA lets first-time buyers contribute up to $8,000 per year, to a $40,000 lifetime maximum. Contributions are tax-deductible, like an RRSP, and withdrawals for a qualifying first home purchase are completely tax-free, like a TFSA. It's genuinely one of the best tax-advantaged tools available for this specific purpose.
The RRSP Home Buyers' Plan (HBP)
The HBP lets you withdraw up to $60,000 from your RRSP (increased from $35,000 in the 2024 federal budget) tax-free to put toward a first home, provided you repay it back into your RRSP over 15 years. Unlike the FHSA, this withdraws money you may have already saved for retirement, so it's worth weighing the repayment obligation against your retirement plan.
You Can Use Both, for the Same Purchase
The FHSA and the HBP are separate programs, and there's nothing stopping you from using both toward the same home purchase, meaningfully increasing your available tax-advantaged down payment funds if you've been contributing to both.
A Gifted Down Payment
Family can gift you money toward your down payment. Lenders will require a signed gift letter confirming the funds are a true gift, not a loan, with no repayment expected, along with documentation showing the funds landing in your account well before closing.
Practical Saving Strategies
- Automate transfers into your FHSA and/or a dedicated high-interest savings account right after payday
- Track where your money actually goes for a month or two before setting a savings target, most people underestimate discretionary spending
- Direct any bonuses, tax refunds, or side income straight to your down payment fund rather than everyday spending
Ready to Start Planning?
We'll help map out how close you are and what timeline makes sense for your specific numbers. Talk to Sean.