TFSA vs RRSP vs FHSA for a House Down Payment: Which Should Hold Your Money?

1. The short answer: order, not just choice

If you are a first-time buyer starting from zero, put money into the FHSA up to its annual limit before anything else, because it combines a tax deduction on the way in with a fully tax-free withdrawal on the way out and never has to be repaid. Once you have used that year's FHSA room, or once you have hit the $40,000 lifetime FHSA limit, the TFSA is the next stop: no deduction, but withdrawals are always tax-free and never owed back. The RRSP Home Buyers' Plan comes last, and only if you already have RRSP savings you are comfortable turning into a 15-year repayment obligation.

2. What each account actually does for a down payment

All figures below are the current CRA rules as of this writing. Every account listed here can hold cash, GICs, or investments; the differences that matter for a down payment are room, tax treatment, and what you owe back.

Sources: Canada Revenue Agency, First Home Savings Account (FHSA); CRA, The Home Buyers' Plan; CRA, Calculate your TFSA contribution room. Accessed September 2026.

3. Why the FHSA usually goes first

The FHSA is the single account on this list that pairs a tax deduction going in with a completely tax-free withdrawal coming out, and it carries no repayment obligation at all. An $8,000 FHSA contribution reduces your taxable income the same year, the same way an RRSP contribution does, and when you eventually withdraw it for a qualifying home, none of it, including any growth, is taxed.

Two limits shape how you use it. The room builds at $8,000 per year up to a $40,000 lifetime cap, so filling it from zero takes a minimum of five years even before you factor in any growth. And the account has a maximum participation period: it must close by the earliest of the 15th anniversary of opening your first FHSA, the year you turn 71, or the year after your first qualifying withdrawal. To open one at all, you have to be an adult resident of Canada and a first-time home buyer, meaning you (and, if applicable, your spouse or common-law partner) have not lived in a home either of you owned as a principal residence in the current year or the four preceding calendar years.

Source: Canada Revenue Agency, First Home Savings Account (FHSA); CRA, Tax deductions for FHSA contributions; CRA, Closing your FHSAs. Accessed September 2026.

4. Where the TFSA fits in

The TFSA does not give you a deduction, but every dollar you withdraw, including growth, comes out tax-free, and none of it has to be paid back. The annual dollar limit for 2026 is $7,000, and unused room from every year since you turned 18 (the program started in 2009) carries forward indefinitely. If you have never contributed and have been a Canadian resident aged 18 or older every year since 2009, CRA's published annual limits add up to $109,000 of room. That total is our own sum of CRA's individually published yearly figures rather than a single published cumulative number, so check your exact figure in your CRA My Account before relying on it.

In practice, the TFSA is where down payment savings go once that year's FHSA room is used up, or for the part of the target above what the FHSA can absorb on its five-year minimum schedule, or for closing costs and moving expenses that sit outside the FHSA's "qualifying home purchase" rules. It is also the most flexible piece: if your plans change, timeline shifts, or the purchase falls through, TFSA money keeps working for any goal with no forms to file, unlike money inside an FHSA or an HBP withdrawal.

Source: Canada Revenue Agency, Calculate your TFSA contribution room. Accessed September 2026.

5. Should you add the Home Buyers' Plan too?

The Home Buyers' Plan lets a first-time buyer withdraw up to $60,000 from an RRSP (increased from $35,000 for withdrawals made after April 16, 2024) toward a qualifying home, tax-free at the time of withdrawal. You can use an HBP withdrawal and an FHSA qualifying withdrawal for the same home, as long as you separately meet each program's conditions when you make each withdrawal.

The trade-off is real: an HBP withdrawal is a loan from your own retirement account. You repay it over 15 years. Repayment normally starts the second calendar year after the year you withdrew, but a temporary relief measure defers that start to the fifth year for first withdrawals made between January 1, 2022 and December 31, 2028, so a withdrawal made today begins repaying in its fifth year. Whatever you do not repay in a given year gets added to your taxable income for that year instead.

The HBP tends to make sense when you already have RRSP dollars sitting in an old employer plan that are not otherwise earmarked for near-term retirement contributions, or when the FHSA and TFSA alone will not close the gap on your timeline. It tends to make less sense when the RRSP balance you would withdraw is the retirement saving you are relying on, since pulling it out adds a fixed repayment obligation on top of the mortgage you are about to take on.

Source: Canada Revenue Agency, The Home Buyers' Plan; CRA, Repayments to the Home Buyers' Plan; Department of Finance Canada, Putting home ownership back within reach; Department of Finance Canada, Spring Economic Update 2026 legislation (HBP repayment grace period extended through 2028). Accessed September 2026.

6. A worked example: $60,000 without pausing retirement

Take a first-time buyer with $5,200 a month in take-home pay, a $60,000 down payment and closing-cost target, and a five-year timeline. They already contribute $300 a month to a workplace retirement plan and do not want to interrupt it.

• FHSA, maxed out: $8,000/year is $667/month. Over 5 years that is $40,000, exactly the lifetime cap.
• Remaining target for the TFSA: $60,000 minus $40,000 is $20,000 over 60 months, or $333/month.
• Combined house saving: $667 + $333 = $1,000/month, about 19% of take-home pay.
• Retirement contribution, unchanged: $300/month keeps running, about 6% of take-home pay.
• Total committed to both goals: $1,300/month, about 25% of take-home pay, well under the roughly 40% range where overlapping goals typically start to squeeze a budget.

If this buyer also had $12,000 sitting in an old employer RRSP unrelated to their current $300/month retirement contributions, the Home Buyers' Plan would let them add that $12,000 to the same home purchase, on top of the FHSA and TFSA. The cost: about 1/15th of it, roughly $67/month, has to go back into an RRSP over 15 years, with repayment currently starting in the fifth year for withdrawals made through 2028, or the missed portion is added to income that year. The FHSA and TFSA money never carries that condition, which is the entire trade-off in one line.

This is the same principle behind giving every account a specific job toward a specific goal rather than treating savings as one undifferentiated pile, the approach covered in how to prioritize multiple financial goals. If you are funding a house down payment alongside a second near-term goal such as a wedding, the overlap math in can you afford a house and a wedding in the same year applies the same way regardless of which registered account holds the house money, but the wedding portion should never sit in the FHSA itself. See can you use an FHSA for a wedding for the tax cost of getting that wrong.

7. Quick-reference: TFSA vs RRSP (HBP) vs FHSA

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