The most tax-advantaged sources for a home down payment

Jul 8, 2024

If you’re in the market for a home, don’t leave money on the table when saving for your down payment. We’re sharing the different tools you have available to you as a Canadian first time home buyer to save in the most tax-advantaged way.

In this article:

Are you dreaming of home ownership but feeling discouraged due to rising prices and challenging mortgage rates? Make your dream a reality by exploring the best savings and investment strategies available to you. A recent homeownership study done by Leger on behalf of Aviso suggests that only half of the respondents plan to use the most tax-advantaged sources for their down payment. If you’re one of them, you’re leaving a significant opportunity on the table.

The study revealed only 18% plan to use their first home savings account (FHSA) as a source of funds, while 28% plan to use their tax-free savings account (TFSA), and 14% will source funds from the Home Buyers Plan (HBP).

Perpetually rising home prices and higher mortgage rates pose a challenge for Canadians trying to save a down payment. And with the news that Canada Mortgage and Housing Corporation (CMHC) has discontinued its first-time home buyer incentive program, it just got a little bit harder.

Don’t let discouragement stand between you and your dream home. With careful planning and thoughtful saving, you can open the door to possibility. It’s all about making the most of your own financial resources – are you ready to boost your down payment and step onto the property ladder? Unlock your potential for homeownership today and explore your options. You may be surprised by the impact even small changes in your savings and investment strategy can have.

So, what’s the best source of funds for a down payment? Let’s take a closer look.

Down payment funding sources

Our study revealed that about half (49%) of respondents plan to use their personal savings for a home down payment, 26% plan to sell other assets, and 20% expect to source funds from their investments.

Regarding registered accounts, 28% of respondents expect to use their TFSA and 18% plan to use their FHSA. Only 14% plan to use their registered retirement savings plan (RRSP), withdrawing funds under the HBP.

This means that only about half of study participants plan to use the most tax-advantaged sources for their down payment. Why miss out? Not using these accounts could mean you have a smaller down payment toward your new home.

Comparing funding sources

Let’s take a closer look at the potential tax advantages available to you in a scenario with a fictitious BC resident, Mila. Depending on whether Mila invests in a First Home Savings Account (FHSA), a Tax-Free Savings Account (TFSA), or an RRSP via the Home Buyer Plan (HBP), she could not only significantly increase her down payment, but also save thousands of dollars on her tax bill over time.


If Mila deposits $8,000 in an FHSA each year for five years, assuming a 5% return, she will have $46,415.30.

In addition to earning $6,415.30 of tax-sheltered investment income, Mila also benefits from her tax-deductible contributions. Like with an RRSP, her annual FHSA contributions can be deducted from her income, reducing her yearly tax bill.

If we assume Mila makes $80,000 annually in employment income, her federal and provincial taxes owed could be estimated at $14,353. With an $8,000 FHSA contribution, her taxes owed would reduce to $12,097 – a savings of $2,256 annually, or $11,280 over the entire five years.

When Mila goes to buy her house, she can withdraw the funds from her FHSA tax-free, with no requirement to pay the money back.


If Mila deposits $8,000 in a TFSA each year for five years, assuming a 5% return, she will end up with $46,415.30 at the end of those five years, earning $6,415.30 on her investment (the same as with the FHSA scenario above).

However, unlike the FHSA, Mila doesn’t receive any deductions from her income for contributions made to the TFSA. She loses out on that tax advantage.

When Mila goes to buy her house, she can withdraw the funds from her TFSA tax-free without being required to pay the money back.

RRSP via the Home Buyer Plan

If Mila deposits $8,000 in an RRSP each year for five years, assuming a 5% return, she will end up with $46,415.30 at the end of those five years, earning $6,415.30 on her investment (the same as with the FHSA scenario above).

In addition to her investment income, Mila also benefits from her tax-deductible contributions. Like with an FHSA, her annual RRSP contributions can be deducted from her income, reducing her yearly tax bill.

If Mila used the HBP to withdraw from her RRSP for a down payment, the tax benefits she receives would be similar to those of the FHSA. The main difference with using the HBP is that, unlike the FHSA, Mila would have to repay the amount she withdrew from her RRSP (to a maximum of $60,000) within 15 years.

Unregistered investments/savings

If Mila deposits the same amount into an unregistered investment account – $8,000 each year for five years, and assuming the same 5% return – Mila would end up with the same amount of $46,415.30.

It’s the same investment return, but Mila must pay taxes on her investment income ($6,415.30). Assuming the average BC tax rate of 18.18%, Mila will have to pay $1,159.83 in taxes on that income.

  Can contributions be deducted from your income tax? Are investment earnings tax sheltered? Do withdrawals have to be repaid?
Unregistered investments/savings No No No
FHSA Yes Yes No
TFSA No Yes No
RRSP HBP Yes Yes Yes

Making the most of your tax advantages

As we see in Mila’s example, if she cashed in her unregistered investments, she’d owe taxes on the income ($1,159.83) that could have gone toward her down payment. However, in the tax-advantaged accounts – FHSA, HBP, and TFSA – Mila could put that $1,159.83 toward her home purchase.

In the case of the FHSA and HBP, Mila would also gain annual savings on her tax bill—over five years, those savings total $11,280, money she could later put toward her home purchase. And in the case of the FHSA, funds withdrawn for a home purchase don’t need to be paid back.

That means that if Mila invested her $40,000 in an FHSA over five years instead of an unregistered investment, assuming identical returns, the tax savings of the FHSA would total $12,439.83. What a difference it could make to the size of her down payment.

It’s certainly worth looking at your down payment funding sources to make the most of your money. Explore all your options here.

In addition to exploring different tax-advantaged options, it’s also important to consider other factors when planning for homeownership. This includes having a realistic budget and understanding the full costs associated with owning a home, such as property taxes, maintenance fees, and insurance. It’s also important to have a solid understanding of your credit score and how it can impact your mortgage rates.

At the end of the day, owning a home is not just about the financial benefits, but also about the sense of stability and pride that comes with it. It’s an investment in your future and your community.

About the Study

 An online study of 2,016 Canadians aged 18+, including n=433 credit union members, was completed between December 12 and December 21, 2023, using Leger’s online panel. No margin of error can be associated with a non-probability sample (i.e. a web panel in this case). For comparative purposes, a probability sample of 2,016 respondents would have a margin of error of ±2.2%, 19 times out of 20.

Aviso Wealth Inc. (‘Aviso’) is a wholly owned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by the five Provincial Credit Union Centrals and The CUMIS Group Limited. The following entities are subsidiaries of Aviso: Aviso Financial Inc. (including divisions Aviso Wealth, Qtrade Direct Investing, Qtrade Guided Portfolios, Aviso Correspondent Partners), and Northwest & Ethical Investments L.P.

The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters.

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