Last updated on November 25, 2025.
You’ve done the responsible thing—opened a Registered Retirement Savings Plan (RRSP), contributed regularly, and maybe even bragged about it once or twice. If buying your first home is your next big milestone, your diligence could pay off. By transferring your RRSP into a First Home Savings Account (FHSA), you can grow your down payment faster, tax-free.
Data from the BC Real Estate Association states the average home price in BC was $978,658 as of October 2025. This average is up 0.8 per cent from October 2024. So every tax advantage counts.
Here’s the play: Transfer funds from your RRSP to a FHSA. Yes, it’s a good way to avoid paying more taxes than you have to, but should you drain your retirement fund to buy a home?
“In a lot of cases, it’s not about deciding whether to keep money in your RRSP or transfer it to an FHSA,” says Sonny Nielsen, Vancity and Aviso Wealth Advisor. “It’s more like, let’s have a conversation on where you want to end up. And then, working backwards, we can decide which tools out of your toolbox are the right ones to use.”
RRSP vs. FHSA: What’s the difference.
An RRSP is meant for retirement income. An FHSA is specifically designed for people saving for a down payment to buy their first home. To qualify, the home must be your principal residence—meaning you live in it—and it can be a unit in a multi-family building such as a condo or townhouse, a single-family home, or even a mobile home.
Think of your RRSP as your long-term retirement partner. And your FHSA like your wingperson for homeownership.
An RRSP helps you save for retirement and offers tax deductions when you contribute. It also lets first-time buyers “borrow” (from themselves) up to $60,000 from their RRSP through the Home Buyers’ Plan (HBP)—but you’d have to pay that back over time. And, if you have a spouse, and you’re both first-time homebuyers, you can withdraw up to $60,000 each, for a total of $120,000.
The FHSA, introduced in 2023, is designed specifically for first-time home buyers. And your contributions are tax-deductible, just like an RRSP.
The key difference: When you use your FHSA savings to buy a qualifying home, withdrawals are completely tax-free and, unlike using your RRSP, don’t need to be repaid.
2026 contribution limits and deadlines for FHSAs and RRSPs.
The 2026 FHSA limit is $8,000. Meaning you can contribute up to $8,000 per year, to a lifetime maximum of $40,000. The deadline to contribute for 2026 is December 31 of that year.
RRSPs, Sonny tells us, are a little bit different. “Your RRSP limit for 2026 is based on 18 per cent of your earned income from the previous year, up to a maximum of $32,490 for 2026 — whichever is less,” says Sonny. “You can also keep contributing to the 2026 tax year for the first 60 days of 2027. That deadline is usually March 1, unless March 1 falls on a weekend or holiday. In that case, it moves to the next business day.”
Deadlines at a glance:
- RRSP contributions for 2026 can be made up to March 1, 2027.
- FHSA contributions for 2026 can be made up to December 31, 2026.
Step-by-step: How to transfer RRSP funds to your FHSA.
- Open an FHSA. Work with your advisor to set up the account and confirm your eligibility.
- Complete a transfer form. This authorizes the direct move from your RRSP to your FHSA. No taxes triggered.
- Avoid over-contributing. Canada Revenue Agency charges one per cent per month on any excess.
“You really need to make sure you don’t over-contribute,” says Sonny. “That one per cent on excess contributions works out to be 12 per cent a year that the government does a clawback on.”
“Remember”, Sonny says, “Advice is free with Vancity. The last thing you want to do is inadvertently make what you feel is a really good decision, and it comes back to bite you.”
Why transfer from your RRSP to an FHSA?
If you already have RRSP savings but want to use it toward a home purchase, transferring funds to your FHSA can open up tax advantages. It’s all about flexibility.
You can use both programs—the FHSA and the RRSP HBP—at the same time. That means you can stack your savings power, combining the tax-free FHSA withdrawal with the repayable RRSP HBP withdrawal for a bigger down payment.
“They’re both tax-deductible, which is the good news,” says Sonny. “The FHSA comes with no strings attached, while the HBP does require you to pay those funds back over time. It really depends on your income, your goals, and how soon you plan to buy. One option might give you more flexibility than the other.”
Quick recap of FHSA perks:
- Tax-deductible contributions: Reduce your taxable income.
- Tax-free growth: Your investments grow, untouched by tax.
- No repayment required: FHSA withdrawals for home purchases don’t need to be paid back.
If you do use your FHSA account to purchase a home, you must close the account by the end of the year following your first qualifying withdrawal.
“Choosing an FHSA really depends on your timing and whether you qualify as a first-time homebuyer,” adds Nielsen. “If you don’t meet the conditions, an FHSA transfer might not make sense. It all comes down to aligning your goals and choosing the right tool to get you there.”
Sometimes, Sonny says, the best move isn’t to move your money at all. “I see people pull money out of their RRSPs that’s earning a solid return—say, five per cent just to avoid paying a two per cent loan rate,” he explains. “When you look at it that way, the math doesn’t work in your favour. Sometimes it makes more sense to leave the money where it’s growing, put a little less down, and increase your mortgage payments instead.”
Real member story: How Julie’s using an FHSA and RRSP to get closer to her goals.
Julie, one of Sonny’s clients, is a 28-year-old living in the BC Interior. Like many young Canadians, she’s been balancing everyday expenses with long-term goals.
“Julie wants to buy a place in the next couple of years, around the time she turns 30,” says Sonny. “She already has about $50,000 in her RRSP and around $17,000 in her FHSA—$16,000 in contributions and $1,000 in growth—so we started building a plan from there.”
That plan focuses on flexibility. Julie’s contributing $8,000 a year to her FHSA to reach the $40,000 lifetime maximum, money she’ll be able to withdraw tax-free when it’s time to buy her first home.
“Her intention is to use as much as she can from her FHSA first,” explains Sonny. “But if she needs a little more to reach her down payment goal, she can also use the RRSP HBP. That allows her to withdraw up to $60,000 tax-free, as long as she pays it back over time.”
Julie’s aiming to buy a home around the $400,000 mark. That means she’ll need roughly $80,000 for a 20 per cent down payment. Between her FHSA and RRSP, she’s well on her way.
“The idea is to make sure she can reach her goal without overextending herself,” says Sonny. “We meet regularly to check in, make adjustments, and ensure her plan still makes sense if life throws her a curveball.”
By combining her FHSA and RRSP strategically, Julie’s been able to grow her savings tax-efficiently, and turn what once felt like a distant goal into a concrete plan.
If you’re in a similar situation to Julie, be sure to check out how much money first-time homebuyer incentives can save you. (Hint: It’s thousands!)
What happens if I don’t use my FHSA?
If you don’t use your FHSA, don’t worry, there’s a safety net. “You can directly transfer unused FHSA funds back into your RRSP without immediate tax consequences,” says Sonny. “So there’s not a big downside if you don’t use it for a home purchase.”
How to maximize your savings strategy.
To maximize your savings strategy, start by understanding how each account—RRSP, Tax Free Savings Account, and FHSA—can work together to serve different goals.
Every Canadian saver’s situation is unique. Maybe you’re early in your career and just starting to build income. Maybe you’re balancing debt and rent while saving for your first home. Your ideal mix of contributions will depend on your income, goals, and timeline. It’s always smart to reach out to a wealth advisor to get some financial advice.
For example, an expert might bring up that RRSPs can do more than just save for retirement. You can invest the money in your RRSP so it builds wealth and shelters you from taxes.
“Think of these programs as an umbrella from taxes,” says Sonny. “Once the money’s there, it’s sheltered. You still get to decide how to invest it—whether that’s in a high-interest savings account, a term deposit, mutual funds, or something else. You’ve got options.”
Inside an RRSP, your contributions grow tax-deferred until you withdraw them, ideally in retirement when your income (and tax rate) is lower. That means every dollar you invest today has more time and space to compound—and potentially help you reach your goals faster.
Know whether to transfer your RRSP to an FHSA with advice from an expert.
Transferring funds from your RRSP to an FHSA could be the move that brings homeownership within reach. With the right guidance and a clear understanding of your limits, you can take advantage of both programs without compromising your long-term financial goals. When it comes to finances, “it just makes sense to bounce off somebody who does this for a living. They can give you direction,” says Sonny.
A Vancity wealth advisor can help you figure out how to make your money work smarter, not harder. You might be closer to your first set of home keys than you think.
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. The information contained in this article is from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This information is for informational and educational purposes and is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. Using borrowed money to finance the purchase of securities involves greater risk than purchasing using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of the securities purchased declines. Please see our Terms of Use. or complete. This material is not intended to be investment, tax or other advice and should not be relied on without seeking the guidance of a professional to ensure your circumstances are properly considered.
