First-Time Home Buyer Savings in 2027: FHSA vs RRSP

Consider a hypothetical example: a 29-year-old graphic designer in Toronto earning $75,000 a year, who has $20,000 saved but worries inflation is eroding its value while condo prices keep inching upward.

Her question is one many Canadians share: "Where do I put my money so it grows fast enough to actually buy a place?"

In Canada, the government offers two tax shelters designed specifically to help you buy a house: the First Home Savings Account (FHSA) and the RRSP Home Buyers’ Plan (HBP). But using them wrong can cost you thousands in lost tax refunds.

Here is a hypothetical illustration of how the two accounts can work together.

The Undisputed King: The FHSA

Introduced a few years ago, the FHSA (First Home Savings Account) has fully matured into the most powerful savings vehicle in Canadian history. It combines the best of a TFSA and an RRSP.

• Tax-Deductible Contributions: Like an RRSP, money you put in reduces your taxable income for the year. Put in $8,000, and your taxable income drops by $8,000.
• Tax-Free Withdrawals: Like a TFSA, when you withdraw the money to buy a qualifying first home, you pay absolutely no tax on the growth.

The Backup Plan: RRSP Home Buyers’ Plan (HBP)

The RRSP Home Buyers’ Plan allows you to withdraw up to $60,000 (recently increased from the old $35k limit) from your RRSP tax-free to buy your first home.

But there is a major catch: You have to pay it back.

When you use the HBP, it is essentially a loan to yourself. You have 15 years to repay the amount back into your RRSP. If you miss a repayment in any given year, the government treats that amount as taxable income, and you get hit with a tax bill.

A Worked Hypothetical Example (The Hybrid Method)

Our hypothetical saver earns $75,000 a year and can save about $10,000 annually. Here is an illustrative blueprint.

Step 1: Max out the FHSA first ($8,000)

The first $8,000 of savings goes into a self-directed FHSA invested in safe GICs and high-interest ETFs yielding around 4.5%. At a $75,000 income in Ontario, this $8,000 deduction would generate a tax refund of roughly $2,300 (illustrative; actual refunds depend on your marginal rate and province).

Step 2: Put the Tax Refund into the RRSP ($2,300)

The $2,300 refund is contributed to the RRSP. This generates *another* smaller tax refund the following year.

Step 3: The Withdrawal Phase

Fast forward a few years. When the buyer is ready to purchase, all the money can be withdrawn from the FHSA entirely tax-free (and it never has to be repaid). The RRSP funds can also be withdrawn using the Home Buyers' Plan — but that portion must be repaid over 15 years.

The Takeaway for 2027 Buyers

If you are a Canadian looking to buy your first home, consider this order of operations: open an FHSA — even a small contribution starts the clock on your annual contribution room. Max out the FHSA first, then use the RRSP for leftover savings.

A TFSA still has a role — its tax-free withdrawals are valuable for emergency funds and non-housing goals — but it gives you no tax deduction today, so the FHSA and RRSP usually come first for down-payment savings.