Saving for your first home: When to use an FHSA, TFSA or both together

Buying your first home is an exciting milestone, but rising home prices can make saving for it feel challenging. Fortunately, Canadians have access to several registered accounts that can help make the journey more manageable.

Two of the most powerful tools are the First Home Savings Account (FHSA) and the Tax-Free Savings Account (TFSA). Each account offers unique advantages, and, when used together, they can create a more flexible and tax-efficient way to grow your down payment over time. 

FHSA vs. TFSA: What’s the difference for first-time homebuyers?

The FHSA and TFSA are both registered investment accounts, but they’re designed for different purposes. Understanding what each account is designed to do, and what it isn’t, can help you decide when and how to use them.

FHSA for home savings 

The FHSA is designed specifically to help first-time homebuyers save for a qualifying home purchase. Contributions are tax-deductible and investment growth and qualifying withdrawals are tax-free. However, you can only keep the account open for up to 15 years.

Because of this structure, the FHSA tends to work best when your goal and timeline are relatively clear. It’s not meant for non-housing goals, such as emergency savings or general spending, and non-qualifying withdrawals are taxable.

The FHSA is best used when:

• You’re confident you’ll purchase your first home within the next 15 years
• You want to lock in savings specifically for a home purchase
• You have stable income and can benefit from tax deductions

TFSA for flexibility

The TFSA is one of the most flexible accounts available to Canadians. You can use it to save for any short- or long-term goals, including your first home. Unlike with the FHSA, TFSA contributions don’t reduce your taxable income, but you get access to tax-free investment and growth withdrawals. That means you can access your money at any time without facing withdrawal taxes.

The TFSA is best used when:

• You want flexible access to your savings
• Your home-buying timeline is uncertain
• You’re also saving for other more immediate goals, such as travel or an emergency fund

How much can you contribute and how do the tax benefits work?

FHSA: Tax-deductible contributions and tax-free home withdrawals

You can contribute up to $8,000 per year to your FHSA, to a lifetime maximum of $40,000, and your contribution room only starts accumulating once you open your first FHSA. You can also carry forward unused contribution room to future years, up to a maximum of $8,000 per year.

The account can remain open for up to 15 years, giving you time to build savings as your plans take shape. Contributions are tax-deductible, and you can choose when to claim those deductions, while qualifying withdrawals used to buy or build a first home are tax-free.

Opening an FHSA early can create more flexibility. Even if you’re not ready to contribute right away, starting the clock gives you the option to use those tax deductions later on when your income may be higher and the benefit more valuable.

TFSA: Tax-free growth and withdrawals 

Contribution limits for the TFSA are set by the federal government each year, and for 2026, the annual limit is $7,000. Contribution room begins accumulating once you turn 18, and you can carry forward unused contribution room indefinitely. If you were 18 or older in 2009 and have never contributed, your total cumulative limit for 2026 would be $109,000.

Investment growth and withdrawals are tax-free, and any amount you withdraw is added back to your contribution room on January 1 of the following year. However, contributions are not tax-deductible like the FHSA.

Using a TFSA for shorter-term savings can help you avoid forced decisions. If your homebuying plans change, you can access your money without triggering tax consequences or permanently losing contribution room, making it a useful complement to more goal specific accounts like the FHSA. 

When should you prioritize an FHSA or a TFSA?

Instead of choosing one account by default, many first-time buyers prioritize different accounts depending on how clearly defined their homebuying timeline is and how flexible they need their savings to be. Here are some practical considerations to help you decide where to focus first.

When does it make sense to use both an FHSA and TFSA together?

Using an FHSA and TFSA together is often helpful if you’re buying in a higher-priced market, saving as part of a dual-income household with stable income or need additional room to build a larger down payment. Layering both accounts can help you grow your savings without locking everything into a single account.

How to use the TFSA and FHSA effectively

Use the FHSA for locked-in home savings, and the TFSA for flexibility

FHSA withdrawals are only tax-free when you put them toward a qualifying first-home purchase, which makes the account advantageous if you’re confident your savings will go toward buying your first home and want a way to set that money aside for this one goal.

The TFSA offers more flexibility. While you can use the account to save for your first home, you may also be working toward other goals along the way. Because you can withdraw funds at any time tax-free, the TFSA can be helpful if plans change or an unexpected expense comes up.

Prioritize contributions strategically

When saving for your first home, contributing to an FHSA first allows you to benefit from tax deductions you can’t get by contributing money to your TFSA. Many buyers start here if they’re eligible.

Once that’s maxed out, TFSA contributions can boost your tax-free savings while keeping some flexibility. Over time, this can help you build a larger down payment without committing all your savings to one account.

Align investments with your home purchase timeline

FHSAs and TFSAs can hold the same types of investments, such as ETFs and mutual funds. That means you can take a consistent approach across both accounts and adjust your strategy based on when you expect to buy your home.

A common planning framework often looks like this:

• More than five years away: A more growth-oriented approach may make sense when you have time to ride out market ups and downs.
• Three to five years away: Many buyers shift to a more balanced approach as their purchase plans start to take shape.
• Zero to two years away: As your timeline becomes clearer, lower-risk options can help protect the savings you’ve already built.

The most important thing is consistency. The account type determines how your savings are taxed, not the investment itself, so aligning your approach across accounts can help keep your plan simple as your homebuying goal gets closer.

If you’re looking for some guidance, a financial advisor can help create a tailored savings plan that aligns with your homeownership goals and timeline. 

Where the RRSP Home Buyers’ Plan (HBP) can fit into your plan

In addition to the FHSA and TFSA, the RRSP Home Buyers’ Plan (HBP) can help give your down payment an extra boost. The HBP allows first-time buyers to withdraw up to $60,000 from your RRSP tax-free to put toward a qualifying home purchase without paying tax on the withdrawal. For couples, that can mean up to $120,000 combined.

But there’s a catch: you’ll need to repay the amount you withdraw over a 15-year period, with repayments typically starting two to five years after your purchase. If you miss a repayment, that amount is added to your taxable income for the year.

On the one hand, the HBP can be a helpful supplement if you’ve already built up meaningful RRSP savings and want to maximize your buying power, especially in higher-priced markets.  

On the other hand, if tapping your RRSP would significantly set back your long-term retirement goals, or if you only have a small amount saved, it may make more sense to prioritize the FHSA and TFSA. The right mix depends on your timeline, whether your income is high enough to support your repayments and overall financial goals.

What your down payment plan could look like

Rather than relying on a single account, you can combine them to build a larger, more tax-efficient down payment.

Here’s how that might play out in practice.

Scenario one: You invested the maximum annual limit of $8,000 in your FHSA for five years and saw an annualized average market return of 7%. You’d have about $49,000 over that time.

If you had $30,000 invested in a TFSA but didn’t contribute during those five years, your savings would still grow to about $42,000, assuming a 7% return.

You could withdraw that money from each account tax-free, meaning you’d have about $91,000 available to put towards a down payment.

Scenario two: Say you have the $91,000 from your FHSA and TFSA, but also have sizeable savings in your RRSP. If you withdraw the maximum of $60,000 through the HBP, your down payment would grow to $151,000.

Frequently Asked Questions