Down payment savings goal

The smart order to save for a down payment in Canada

If you're saving for a first home, the order of accounts you use matters more than people realize. The right hierarchy maximizes both your effective contribution rate (via tax deductions) and the after-tax purchasing power of every dollar:

1. FHSA — fill it first up to $8,000/year and $40,000 lifetime
2. RRSP Home Buyers' Plan — if you have unused room, contribute and plan to use the HBP for up to $60,000 each
3. TFSA — flexible, tax-free, $7,000/year in 2026
4. Non-registered — only if you've maxed the above

A first-time-buyer couple can stack up to $80,000 of FHSA contributions ($40,000 each) + up to $120,000 of HBP withdrawals ($60,000 each) + TFSA savings — $200,000 or more in tax-advantaged down payment money, plus investment growth inside the FHSAs.

The FHSA — Canada's newest first-home account

• Tax-deductible contributions (like RRSP) up to $8,000/year, $40,000 lifetime
• Tax-free growth (like TFSA)
• Tax-free withdrawal when used for a qualifying first home — NO repayment required (unlike HBP)
• 15-year max from account opening to first use
• If you don't buy, the balance rolls to RRSP without affecting RRSP room

The FHSA is mathematically the best account for first-home savings if you'll actually buy a home in 15 years. See TFSA vs RRSP vs FHSA for the full comparison.

How long does it take to hit a typical down payment?

Time-to-target depends on where you start, how much you save, and your investment return. Some baselines for hitting $80,000 (a reasonable Canadian down payment for an $800k home):

• $0 starting, $800/month at 5% return: ~7.6 years
• $15,000 starting, $800/month at 5%: ~5.6 years
• $30,000 starting, $1,200/month at 5%: ~3.4 years
• $15,000 starting, $800/month at 0% (cash savings): ~6.8 years

What rate of return to assume

• Aggressive (10+ year horizon): 6–7% — equity-heavy portfolio
• Balanced (5–10 years): 4–5% — mix of equities and bonds
• Conservative (1–3 years): 2–3% — high-interest savings, GIC ladder
• Cash (under 1 year): 0–2% — keep liquid, accept inflation drag

The closer to your purchase date, the more conservative the portfolio should be. Don't have 100% equities the year before you plan to buy.

Where to actually park the money

• FHSA at Wealthsimple / Questrade: zero-fee ETF investing, no minimums
• FHSA at major bank: convenient but watch for fund fees (often 2%+ MER)
• RRSP via your employer match: free money — fully fund the match before independent savings
• High-interest savings accounts: EQ Bank, Tangerine, Wealthsimple Cash — 3-5% interest on cash buffer
• GIC ladder: lock in 4-5% on the portion you won't need for 1-5 years

Common down payment myths

• “You need 20% down” — FALSE. CMHC-insured 5% on first $500k + 10% above works
• “Gift down payments are limited” — FALSE. Unlimited gifts from immediate family work with a gift letter
• “The HBP is taxable” — FALSE. The HBP withdrawal is tax-free IF you repay over 15 years
• “FHSA is just RRSP” — FALSE. FHSA is strictly better for first-home savings

Related

• TFSA vs RRSP vs FHSA
• Down payment + CMHC
• Compound interest
• Affordability
• Rent vs buy