For most first time home buyers in Ontario, the biggest obstacle to purchasing a home isn’t qualifying for a mortgage. It’s pulling together the down payment.
With rising home prices across the GTA, Halton, Hamilton, and surrounding areas, many buyers assume they must save every dollar on their own. In reality, most first time buyers use a combination of savings tools and family assistance to reach the required amount.
Outside of your own savings, there are three common and effective down payment sources I see as a mortgage agent are the First Home Savings Account (FHSA), the RRSP Home Buyers’ Plan, and gifted funds from family.
Understanding how these work can significantly speed up your path to home ownership.
The First Home Savings Account (FHSA)
The FHSA is one of the most powerful tools ever introduced for first time buyers in Canada.
It combines features of both an RRSP and a TFSA.
You can contribute up to $8,000 per year, with a lifetime maximum of $40,000. Contributions are tax deductible, meaning they reduce your taxable income, and withdrawals used toward the purchase of your first home are completely tax free.
For couples, this can mean up to $80,000 available for a down payment.
From a mortgage perspective, FHSA funds are treated as your own savings once withdrawn properly. Lenders simply require proof of contribution history and confirmation the withdrawal meets CRA guidelines.
Many buyers are now using the FHSA as their primary down payment vehicle, especially those planning to buy within the next three to five years.
Using RRSPs Through the Home Buyers’ Plan
The RRSP Home Buyers’ Plan has been helping first time buyers for decades and remains extremely effective.
Eligible buyers can withdraw up to $60,000 from their RRSPs, tax free, to purchase a first home. Couples can access up to $120,000 combined.
Unlike the FHSA, RRSP withdrawals must be repaid over time. Repayment typically begins in the second year after purchase and is spread over up to 15 years.
If repayments are missed, the required amount is added back into your taxable income for that year.
From a mortgage qualification standpoint, RRSP funds used under the Home Buyers’ Plan are treated as legitimate down payment dollars as long as the funds are in the account for at least 90 days prior to withdrawal.
This is one of the most common strategies buyers use to supplement savings or reduce how much they need to borrow.
Gifted Down Payments From Family
Gifted down payments are extremely common in Ontario, especially with first time buyers entering higher-priced markets.
Most lenders allow gifted funds from immediate family members such as parents, grandparents, or siblings.
The key requirements are straightforward:
A signed gift letter is required
The money must be deposited into the buyer’s account before closing
Gifted funds can be used for part or all of the down payment. In many cases, they can also help cover closing costs.
From the lender’s perspective, gifted funds reduce risk because they are non-repayable and do not create new monthly debt obligations.
Combining All Three Strategies
Many first time buyers do not rely on just one source.
A very common structure looks like this:
FHSA savings for the base down payment
RRSP withdrawals to increase purchasing power
A family gift to cover the remaining shortfall or closing costs
Using multiple sources can reduce mortgage payments, improve approval strength, and help buyers avoid stretching their budget too thin.
Final Thoughts
Buying your first home in Ontario rarely comes down to one perfect savings account. It’s usually about understanding how FHSA funds, RRSPs, and gifted money can work together.
With proper planning, many buyers are closer to home ownership than they realize.