How RRSP Contributions Can Increase a First-Time Buyer’s Down Payment
March 2, 2026 is the RRSP contribution deadline, and for many first-time homebuyers, it quietly represents one of the most powerful planning opportunities available. Not because it involves chasing returns, timing the market, or taking on risk, but because it allows you to use the tax system intentionally to increase your buying power.
When structured properly, RRSPs, TFSAs, and the Home Buyers’ Plan can work together to turn savings you were already planning to set aside into a meaningfully larger down payment. This can directly impact affordability, mortgage qualification, long-term comfort, and overall cost of borrowing.
This is not a loophole. It is planning.
The Core Idea in Simple Terms
If you are already saving for a down payment and you have available RRSP contribution room, contributing those funds to your RRSP before the deadline may generate a tax refund. That refund can then be redirected into your TFSA or held for closing costs. The end result is a higher down payment without increasing debt.
For higher-income earners, the impact can be significant.
Example:
Planned savings: $20,000
Income: approximately $125,000
Estimated tax refund: $7,000 to $8,000
Total available funds: close to $28,000
Nothing about this strategy relies on investment growth. It relies on timing, structure, and understanding how different registered accounts interact.
Why Down Payment Structure Matters More Than Most Buyers Realize
Many buyers focus on one number: the purchase price. Others focus on the mortgage rate. Very few stop to think deeply about how the down payment itself is structured.
Down payment structure affects:
- How much you need to borrow
- Whether mortgage insurance applies
- Monthly cash flow
- Stress test qualification
- Long-term interest costs
- Financial flexibility after purchase
An extra $8,000 in down payment can be the difference between crossing an insured threshold, qualifying more comfortably, or simply keeping a stronger emergency buffer after closing.
This is why planning before you buy matters more than reacting after you have an accepted offer.
Understanding RRSPs: More Than a Retirement Tool
Registered Retirement Savings Plans are often misunderstood, especially by younger buyers. Many assume RRSPs are only useful decades from now, or that money placed inside is locked away forever.
Neither is true.
How RRSPs Work. RRSP contributions:
- Reduce your taxable income in the year you contribute
- Grow tax-deferred inside the plan
- Are taxed when withdrawn, unless withdrawn under specific programs
- Contribution room accumulates each year based on income, and unused room carries forward indefinitely.
For high-income earners, RRSPs are one of the most effective tools for managing taxes while building future flexibility.
RRSPs and First-Time Homebuyers: The Home Buyers’ Plan
The Home Buyers’ Plan, commonly referred to as the HBP, allows first-time buyers to withdraw funds from their RRSP to use toward a down payment.
As of current rules:
- You can withdraw up to $60,000 per person
- Withdrawals are not taxed at the time of withdrawal
- The funds must be repaid over time, typically starting a few years after purchase
- Repayments are made back into your RRSP and are not tax-deductible
- For a couple, this can mean up to $120,000 accessed from RRSPs toward a purchase.
This is not free money. It is a structured loan from your future self. But when used intentionally, it can significantly reduce reliance on high-ratio borrowing.
The Tax Refund: The Most Overlooked Part of the Strategy
The real power of this strategy is not only in the RRSP contribution itself, but in what you do with the tax refund.
When you contribute to an RRSP, the government effectively returns a portion of that contribution based on your marginal tax rate. For higher-income earners, this refund can be substantial.
That refund can then be:
- Contributed to a TFSA
- Set aside for closing costs
- Added directly to your down payment
- Used to maintain liquidity post-purchase
- This is where many buyers miss the opportunity. They either wait too long, or they spend the refund rather than assigning it a purpose.
How TFSAs Fit Into the Picture
Tax-Free Savings Accounts are the opposite of RRSPs in structure, but complementary in planning.
How TFSAs Work. TFSA contributions:
- Are not tax-deductible
- Grow tax-free
- Can be withdrawn at any time without tax consequences
- Restore contribution room when funds are withdrawn
- This makes TFSAs ideal for short- to medium-term goals like home purchases.
Why RRSPs and TFSAs Work Best Together
When used together, these accounts create balance.
- RRSPs reduce taxes today
- TFSAs preserve flexibility and liquidity
- Refunds move from a tax-deferred environment into a tax-free one
- You gain usable capital without increasing borrowing
- This pairing allows buyers to strengthen their position without sacrificing long-term planning or emergency reserves.
A Realistic Buyer Scenario
Let us look at a realistic scenario.
- You are a first-time buyer earning $125,000.
- You have saved $20,000 and plan to buy within the next 6 to 18 months.
- You have unused RRSP contribution room.
Instead of leaving the $20,000 in a regular savings account:
- You contribute it to your RRSP before the deadline
- Your taxable income is reduced
- You receive a tax refund of roughly $7,000 to $8,000
- That refund is directed into your TFSA
- You now have close to $28,000 available between accounts
When it is time to buy:
- You can withdraw RRSP funds under the HBP
- You can access TFSA funds tax-free
- You maintain flexibility for closing costs or reserves
- This is not aggressive. It is intentional.
Key Rules and Timing Considerations
This strategy only works when rules and timelines are respected.
Important items to watch:
- RRSP contribution deadline: March 2, 2026
- TFSA contribution limits still apply
- RRSP funds must be in the account for a minimum period before HBP withdrawal
- HBP withdrawals must be repaid according to schedule
- Cash flow must support future RRSP repayments
This is why planning should happen well before you make an offer.
Common Mistakes First-Time Buyers Make
Even smart, high-income buyers make avoidable mistakes. Common ones include:
- Waiting until after the RRSP deadline
- Contributing without understanding repayment obligations
- Assuming RRSP money is inaccessible
- Spending tax refunds unintentionally
- Overfunding RRSPs without liquidity planning
- Treating down payment planning as separate from mortgage strategy
- These mistakes are rarely about intelligence. They are about lack of coordination.
Why This Matters for Mortgage Qualification
From a lending perspective, down payment size and source matter.
A stronger down payment can:
- Reduce mortgage insurance premiums
- Improve debt ratios
- Increase lender flexibility
- Reduce stress test pressure
- Improve overall approval comfort
- Lenders care not just about how much you earn, but how well your finances are structured.
This Is Not About Chasing the Lowest Rate
A lower rate does not always mean a lower cost of borrowing.
A larger down payment can sometimes do more for long-term outcomes than shaving a few basis points off a rate.
The goal is not perfection. The goal is comfort, flexibility, and resilience.
Planning Beats Stress Every Time
Buying your first home is not only a financial decision. It is an emotional one. When the numbers are tight, stress follows. When the structure is solid, decisions become easier.
Down payment planning is one of the few areas where you still have control before you buy. Once the mortgage is in place, options narrow.
This is why early, thoughtful planning matters.
Final Thoughts
RRSPs, TFSAs, and the Home Buyers’ Plan are not separate tools. They are parts of one system. When used together, they can materially change what is possible for a first-time buyer.
If you are unsure how this fits into your personal timeline or income level, support is available.
You can book a call at www.mortgagecall.ca
or email [email protected]