Saving for Your First Home Down Payment in Canada

A practical, numbers-based savings plan for Canadian first-time buyers — including all the tax-advantaged accounts to reach your goal faster.

How Much Do You Actually Need?

The minimum down payment in Canada is based on the purchase price of the home. For a $600,000 home, you need 5% on the first $500,000 ($25,000) and 10% on the remaining $100,000 ($100) — a total of $35,000. But you should also budget for closing costs of 1.5%–4%, which on a $600,000 home means an additional $9,000–$24,000. Plan to have your down payment plus closing costs saved before you begin house hunting.

Purchase Price	Min Down Payment	Estimated Closing Costs	Total Cash Needed
$400,000	$20,000 (5%)	$8,000–$16,000	$28,000–$36,000
$600,000	$35,000	$9,000–$24,000	$44,000–$59,000
$800,000	$55,000	$12,000–$32,000	$67,000–$87,000
$1,000,000	$200,000 (20%)	$15,000–$40,000	$215,000–$240,000

Step 1 — Open an FHSA Immediately

The First Home Savings Account (FHSA) is your single best savings tool. Contributions are tax-deductible, growth is tax-free, and qualifying withdrawals for a first home are completely tax-free — no repayment required. The annual limit is $8,000, with a $40,000 lifetime maximum. Unused room carries forward one year (up to $8,000 extra). Open an FHSA as early as possible, even if you can only contribute a small amount, because your 15-year account lifetime clock starts on the date you open it, not when you max it out.

Step 2 — Build Your RRSP for the Home Buyer's Plan

The Home Buyer's Plan (HBP) lets you withdraw up to $60,000 from your RRSP tax-free for a first home purchase, repaid over 15 years. The key rule: funds must sit in the RRSP for 90 days before withdrawal. RRSP contributions also reduce your taxable income, generating a tax refund that you can redirect back into savings. A $100 RRSP contribution at a 43% marginal rate generates a $4,300 refund — put that straight into your FHSA or savings account.

Step 3 — Use a TFSA as a Flexible Overflow

Once you've maxed your FHSA and are building RRSP contributions, your Tax-Free Savings Account (TFSA) is the next best vehicle. Growth and withdrawals are tax-free with no restrictions. The 2025 TFSA annual contribution limit is $7,000. Unlike the FHSA and HBP, there are no conditions on how you use TFSA funds — you can access the money for any reason, including your down payment, closing costs, or moving expenses.

Sample 5-Year Savings Plan

Year	FHSA Contribution	RRSP Contribution	TFSA	Year-End Total
Year 1	$8,000	$5,000	$3,000	~$16,500
Year 2	$8,000	$8,000	$5,000	~$38,500
Year 3	$8,000	$100	$5,000	~$63,000
Year 4	$8,000	$12,000	$5,000	~$90,000
Year 5	$8,000	$15,000	$5,000	~$120,000+

Totals include assumed 4% investment growth. Actual results depend on contribution timing and investment performance.

Automate Your Savings

The single most effective savings behaviour is automation. Set up an automatic transfer on every payday to your FHSA first, then RRSP, then TFSA. Treat down payment savings like a fixed expense, not a discretionary one. Even saving $500 per bi-weekly pay period = $13,000 per year and compounds significantly over five years.

Where to Keep Your Down Payment Savings

For funds you need within 1–2 years, use high-interest savings accounts or short-term GICs (1-year GICs are currently offering 4–5% in Canada). For a 3–5 year timeline, balanced ETFs or bond ETFs inside your FHSA offer better growth with manageable risk. Avoid heavily equity-weighted portfolios if your purchase is less than two years away — market downturns could delay your timeline.

Cut Bank Fees to Accelerate Savings

Monthly bank fees of $15–$30 per month add up to $180–$360 per year — money that should be going toward your down payment. Fee-free banking accounts, including KOHO's no-fee account, eliminate this drag entirely. Every dollar saved on fees is a dollar compounding toward homeownership.