FHSA or RRSP Home Buyers' Plan: What London First-Time Buyers Should Investigate Before Choosing

If you're dreaming of buying your first home in London, Ontario — whether it's a charming bungalow in Wortley Village, a modern townhome in Talbot Village, or a starter home in Oakridge — you've likely heard about two powerful savings tools: the First Home Savings Account (FHSA) and the RRSP Home Buyers' Plan (HBP). Both can help you reach your down payment goals faster, but they work very differently.

Before you make a decision, here's what London first-time buyers should investigate to choose the right option for their unique situation.

Understanding Your Two Options

The First Home Savings Account (FHSA)

Introduced in 2023, the FHSA is specifically designed for first-time home buyers. You can contribute up to $8,000 per year (with a lifetime maximum of $40,000), and your contributions are tax-deductible — similar to an RRSP. The major advantage? When you withdraw funds to purchase a qualifying home, you pay no tax on the withdrawal, and there's no requirement to repay the money.

For a London buyer targeting a $500,000 to $600,000 property in neighbourhoods like Westmount or Byron, this could translate to significant tax-free savings toward your down payment.

The RRSP Home Buyers' Plan (HBP)

The HBP allows first-time buyers to withdraw up to $60,000 from their RRSPs tax-free to purchase a home (this limit increased from $35,000 in 2024). However, you must repay the withdrawn amount over 15 years, starting the second year after your withdrawal. Miss a repayment? That amount gets added to your taxable income for the year.

Key Factors London Buyers Should Investigate

1. Your Timeline to Purchase

How soon are you planning to buy? If you're a Western University graduate who's landed a job in London and wants to buy within the next two years, the FHSA's $8,000 annual contribution limit may not give you enough time to maximize savings. In this case, combining both strategies — or leaning more heavily on existing RRSP savings through the HBP — might make sense.

Conversely, if you're a Fanshawe College student just starting your career, opening an FHSA now gives you years to build tax-free savings before you're ready to explore homes in areas like Lambeth or Masonville.

2. Your Current Income and Tax Bracket

Both the FHSA and RRSP contributions reduce your taxable income. However, the FHSA offers the added benefit of tax-free withdrawals. If you're in a higher tax bracket now but expect to be in a similar or higher bracket when you buy, the FHSA's double tax advantage is particularly valuable.

3. London's Current Market Reality

In today's London market, entry-level homes typically range from $450,000 to $650,000, depending on the neighbourhood and property type. A semi-detached in Old North might list around $550,000, while a newer townhome near the West 5 development could be in a similar range.

For a $500,000 purchase, you'd need a minimum 5% down payment ($25,000) plus closing costs — typically 1.5% to 4% of the purchase price. Running the numbers on how quickly each savings vehicle can get you there is essential.

4. Repayment Flexibility

This is where the FHSA shines. Unlike the HBP, there's no repayment requirement. For first-time buyers already stretching their budget to afford a home near the Thames River trails or within walking distance to Springbank Park along Commissioners Road, not having an additional "debt" to repay can provide valuable breathing room in those crucial early years of homeownership.

5. Can You Use Both?

Yes! Many London buyers don't realize you can combine both programs. For a qualifying home purchase, you could potentially withdraw up to $60,000 from your RRSP through the HBP and use your full FHSA balance. This strategy could provide substantial funds toward a down payment on properties in sought-after areas.

Practical Steps for London First-Time Buyers

1. Open an FHSA as soon as possible — Even if you can only contribute a small amount, opening the account starts your contribution room accumulating.

2. Calculate your target down payment — Research current prices in your preferred London neighbourhoods, whether that's the walkable village feel of Byron with its local gems like Byron Pizza and Bernie's Restaurant, or the family-friendly streets of Oakridge.

3. Consult a financial advisor — A professional can model different scenarios based on your income, timeline, and goals.

4. Get pre-approved early — Understanding your purchasing power helps you set realistic savings targets.

Making the Right Choice for Your Situation

There's no universal "best" answer — the right choice depends on your timeline, existing savings, income level, and homeownership goals. What matters most is that you're taking proactive steps toward owning your first London home.

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Navigating the London real estate market as a first-time buyer can feel overwhelming, but you don't have to figure it out alone. If you're ready to explore your options and find a home that fits both your lifestyle and budget, reach out to Nickey Calford at Calford & Co. Real Estate Team. With deep knowledge of London's diverse neighbourhoods and a commitment to client education, Nickey can help guide you from savings plan to set of keys.