FHSA vs. the RRSP Home Buyers' Plan
The FHSA's $40,000 lifetime limit is smaller than the HBP's $60,000, but FHSA withdrawals never need to be repaid, while HBP withdrawals must be repaid to your RRSP over 15 years starting the second year after you withdraw. Most financial planners suggest maxing the FHSA first, then using the HBP on top of it — together they can put up to $100,000 per person toward a first home, or up to $200,000 for a couple who both qualify, entirely tax-advantaged.
Why the FHSA is genuinely unusual as an account type
Most registered accounts make you choose one benefit or the other: an RRSP gives you a tax deduction going in but taxes withdrawals as income, while a TFSA gives you no deduction going in but tax-free withdrawals. The FHSA is deliberately designed to combine both advantages specifically for a first home purchase — contributions are tax-deductible the same way RRSP contributions are, reducing your taxable income in the year you contribute, and qualifying withdrawals for a first home are completely tax-free the same way TFSA withdrawals are. That combination doesn't exist anywhere else in the Canadian tax system.
What happens if you don't end up buying a home
An FHSA has to be closed within 15 years of opening it, or by the end of the year you turn 71, whichever comes first. If you haven't used it for a qualifying home purchase by then, you can transfer the balance into an RRSP or RRIF tax-free (as long as you have the contribution room), or withdraw it directly, in which case it's taxed as regular income the same way an RRSP withdrawal would be. Either way, the money isn't lost or penalized — it just loses its special first-home tax-free status if unused.
Who actually qualifies as a "first-time" buyer here
The FHSA's definition of first-time buyer is somewhat more generous than the name implies: you (or your spouse or common-law partner) generally can't have owned a home that you lived in during the current calendar year or the four preceding calendar years — meaning someone who owned a home more than four years ago and has been renting since can often still qualify as a first-time buyer for FHSA purposes, even though they've technically owned before.
Curious about the RRSP side? Try the Home Buyers' Plan calculator next to see how the two combine toward your total down payment.