Down Payment Savings Plan

The biggest hurdle for most first-time buyers is the down payment. This calculator shows you exactly when you will have enough — and how government programs like FHSA and the RRSP Home Buyers Plan can get you there faster.

What This Calculator Shows You

Put in what you have saved, what you can put away each month, and the price you are aiming at. It gives you a timeline, factors in the government programs, and shows what changes if you save a little more.

Two things it does that most savings calculators skip, and they matter:

• It moves the target while you save. If prices rise, your goal rises. Ignoring that is how people are surprised to find the finish line has moved.
• It counts the FHSA and the Home Buyers' Plan. Most first time buyers are leaving one or both of these on the table, and together they are worth a great deal of money.

The Two Programs You Should Know About

The First Home Savings Account. You can contribute up to $8,000 a year to a lifetime maximum of $40,000. Your contributions are tax deductible on the way in, like an RRSP, and withdrawals for a qualifying first home are completely tax free on the way out, like a TFSA. And you never pay it back. It is the best deal available to a first time buyer in this country, and it is not close.

The RRSP Home Buyers' Plan. You can withdraw up to $60,000 from your RRSP tax free toward a first home, and a couple who both qualify can each do it. That is up to $120,000 between two people. The catch is that it is a loan from yourself. You repay it into your RRSP over fifteen years, and if you miss a year's repayment, that amount gets added to your taxable income.

You can use both. Stack the FHSA and the Home Buyers' Plan on the same purchase and one person can bring up to $100,000 of tax advantaged money to the table. Two people, up to $200,000.

The order matters: use the FHSA first. It is tax free with nothing to repay. Only reach into the RRSP after that, because that one you owe back.

Two Rules That Catch People Out

The 90 day rule. Money you put into an RRSP has to sit there for at least 90 days before you can pull it out under the Home Buyers' Plan. Contribute in September for an October closing and you cannot use it. This trips up more people than any other part of the program. If you are planning to use the HBP, that contribution needs to be in place months ahead of your closing date, not weeks.

Open the FHSA before you have money to put in it. Your contribution room does not start building until the account is actually open. There is no reason to wait until you have savings to open one. Open it now, even empty, and let the room accumulate while you save.

You Might Be a First Time Buyer Again

This one surprises people, so read it carefully even if you have owned a home before.

For these programs, first time buyer generally does not mean you have never owned. It means you have not occupied a home you owned within a set look back period, commonly four years. So somebody who owned a house, went through a divorce or a move, and has been renting for several years can often qualify again.

I have had this conversation more than once with people who assumed the door was closed to them. If you owned a home a while back and have been renting since, it is worth checking rather than assuming. Confirm your own eligibility with CRA or your accountant, because the details of the look back matter.

What Most People Get Wrong

They aim for twenty percent when a smaller target would do. You do not need twenty percent to buy. The minimum is five percent on the first portion of the price. Twenty percent removes mortgage insurance, which is a good goal, but chasing it for years while paying rent is not automatically the winning move. Sometimes the better plan is buying sooner with less down.

They stop at five percent when ten was within reach. The other direction. Insurance premiums step down as your down payment rises, and the steepest saving on the entire ladder is crossing from five percent to ten. If you are close to that line, a few more months of saving can be worth thousands.

They forget the down payment is not the only cash they need. Legal fees, title insurance, adjustments, moving. Save for the down payment and a closing cushion, not just the down payment.

They do not ask about a gift. A documented gift from an immediate family member is an acceptable down payment source with most lenders. It has to be a genuine gift, not a loan, and it has to be properly documented. If family is in a position to help, that conversation can change your timeline entirely.

They let it sit in a chequing account. If the purchase is a couple of years out, where the money sits matters. Just be careful about taking market risk with money you need on a fixed date, because a bad year right before you buy is a real problem.

Frequently Asked Questions

Q: What is the difference between the FHSA and the Home Buyers' Plan?
The FHSA is a savings account with a lifetime limit of $40,000, where contributions are tax deductible, withdrawals for a first home are tax free, and nothing has to be repaid. The Home Buyers' Plan lets you take up to $60,000 out of an existing RRSP tax free, but you repay it over fifteen years. The FHSA is the better deal. Use it first.

Q: Can I use both the FHSA and the Home Buyers' Plan?
Yes, on the same purchase. Combined, that is up to $100,000 per person in tax advantaged funds toward a first home, or up to $200,000 for a couple where both qualify.

Q: What is the 90 day rule?
Money contributed to an RRSP must remain there for at least 90 days before it can be withdrawn under the Home Buyers' Plan. If you contribute and withdraw too quickly, that contribution is not eligible. Plan your RRSP contributions months ahead of a closing date, not weeks.

Q: I owned a home years ago. Can I still qualify as a first time buyer?
Possibly. These programs generally look at whether you have occupied a home you owned within a defined look back period, commonly four years, rather than whether you have ever owned. People who owned previously and have been renting for several years often qualify again. Confirm your specific situation with CRA or your accountant.

Q: How much do I actually need for a down payment?
The minimum is five percent on the first five hundred thousand dollars of the purchase price, ten percent on the portion between five hundred thousand and one and a half million, and twenty percent at one and a half million and above. Under twenty percent down means mortgage default insurance, which is added to your mortgage.

Q: Can my parents gift me the down payment?
Yes. A gift from an immediate family member is an acceptable down payment source with most lenders. It must be a true gift rather than a loan, and it needs a signed gift letter plus proof the funds were transferred. Lenders verify the source of your down payment, so keep the paper trail clean.

So What Do You Actually Do?

Three things, in this order. Open an FHSA if you do not have one, even if you cannot fund it yet. Find out what you would actually qualify for today, because it is often more than people assume. Then set a target that includes closing costs, not just the down payment.

Here is the thing I see most often. People aim at a number they picked themselves, save toward it for years, and never once check whether it was the right number. A fifteen minute conversation early can save you a great deal of time saving toward the wrong target.

Want to know your real target?
Call or text 403-703-6847. To map it out, have these handy: what you have saved so far, what you can put away monthly, your rough annual income, and the price range you are aiming at.

Shawn Selanders is a RECA-licensed mortgage broker with Mortgage Architects, serving High River, Okotoks, Calgary, Foothills County and Southern Alberta since 1999. Program details are subject to change - confirm current rules with CRA or your accountant.