Buying a home is one of the biggest financial goals many Canadians will work toward — and one of the most daunting. Between rising prices, mortgage rules, and the sheer number of registered accounts to choose from, it can be hard to know where to start. This guide walks through how much you actually need to save, which tax-advantaged accounts can help, and practical strategies for building your down payment faster — whether you're years away or hoping to buy within the next 12 months.
How much do you need to save for a down payment?
To save for a house in Canada, you'll need a minimum down payment of 5% to 20% of the purchase price, depending on what you can afford. The exact amount depends on the price of the home you want to purchase:
$500,000 or less: 5% down payment
$500,000 to $1.5 million: 5% on the first $500,000 and 10% on the remaining amount
$1.5 million or more: minimum 20% down payment
So if you want to buy a house that costs $600,000, your minimum down payment will be $35,000 (5% of the first $500,000 is $25,000, and 10% of the last $100,000 is $10,000).
Even if the home you want doesn't require a 20% down payment, there are definite advantages if you can put together that much. You'll likely avoid having to buy mortgage default insurance, and you'll have a bigger buffer against property price declines.
Additional costs beyond the down payment
Your down payment isn't the only upfront cost to plan for. Buying a home comes with a number of additional expenses that can add up quickly. Closing costs typically range from 1.5% to 4% of the purchase price and include legal fees, title insurance, and administrative charges. Here's what to expect when closing on a house:
Land transfer tax. Most provinces charge a land transfer tax when you purchase property. Some municipalities add their own on top. First-time buyers may qualify for rebates in certain provinces.
Home inspection. A professional home inspection usually costs a few hundred dollars, but it can save you from expensive surprises after you move in.
Property insurance. Your mortgage lender will require you to have home insurance in place before closing.
Moving costs and immediate repairs. Budget for the move itself, plus any urgent repairs or upgrades the home may need right away.
How much house can you afford?
One of the biggest mistakes people make in buying a home is confusing how much the bank will loan them with how much they can actually afford. If you buy based on what you can borrow, you risk ending up house poor — all of your money tied up in your home, with nothing left to do anything else.
Here's an easy way to estimate what you can afford. Start with your total household monthly income (after taxes) and subtract:
Fixed expenses (groceries, utilities, etc.)
Discretionary expenses (dining out, entertainment, etc.)
Savings for other goals (wedding, education, retirement)
Whatever is left over is the maximum you can spend on a monthly mortgage, property taxes, insurance, and maintenance fees. If that number isn't enough to buy the home you want, you either need to find a different home or wait until a better time to make the purchase.
If the numbers don't add up for you now, you'll either need to save more toward a down payment so you can borrow less, or compromise on the size and/or location of the home you're looking to buy. Most likely, it's a combination of the two — bringing down your costs while raising the amount you have at your disposal, and seeing where they meet.
Another good rule of thumb is that no more than 40% of your monthly earnings before taxes should go toward your debt payments (monthly mortgage payment, credit card payments, student loans, etc.). If you go much higher than that, you may struggle to meet your monthly payments and have a harder time qualifying for competitive mortgages.
Tax-advantaged accounts that help you save
Canada offers several registered accounts designed to help you save for a home more efficiently. Each has different tax benefits, contribution limits, and withdrawal rules.
First home savings account (FHSA)
First Home Savings Accounts (FHSAs) let you stockpile up to $40,000 to use toward your first home. The maximum yearly contribution is $8,000, though up to $8,000 of unused room can be carried forward to the next year, so you can contribute as much as $16,000 in the following year)There are two big tax breaks:
Tax deduction on contributions. Any money you contribute to your FHSA reduces your taxable income for that year.
Tax-free gains and withdrawals. Any gains your money makes are tax-free, and you won't be taxed when you withdraw — assuming you're taking it out to buy a first home.
Tax-Free Savings Account (TFSA)
Tax-Free Savings Accounts (TFSAs) don't reduce your taxes when you make a contribution, but any gains you make on the money in your TFSA won't be taxed, no matter what you spend it on — whether that's a majority stake in your neighbour's alpaca farm or a down payment on a house. The maximum yearly contribution to a TFSA in 2026 is $7,000, but any unused contribution room accumulates and carries forward indefinitely, up to the lifetime maximum ($109,000 in 2026).
Registered Retirement Savings Plan (RRSP) and the Home Buyers' Plan
Registered Retirement Savings Plans (RRSPs) are, as the name implies, for retirement. Contributions reduce your taxable income the year they're made. You're still taxed on the money when you make withdrawals, but for most people, that's during retirement, when your income — and tax bracket — is much lower.
So why mention a retirement account in a guide about saving for a down payment? A special program called the Home Buyers' Plan (HBP) lets first-time home buyers withdraw up to $60,000 from their RRSPs, completely tax-free, to use toward their purchase. You do have to pay the money back to yourself, but you have 15 years to do it. RRSP’s also have a maximum yearly contribution limit. For 2026 it’s $33,810 or 18% of your annual income, whichever is less, and unused contribution room accumulates and carries forward indefinitely.
Which account should you contribute to first?
If you're a first-time buyer, the FHSA is generally the strongest starting point because it combines a tax deduction on contributions with tax-free withdrawals — you get benefits on both ends. After you've maxed out your annual FHSA room, consider contributing to a TFSA for its flexibility, or to an RRSP if you want the additional tax deduction and plan to use the HBP. You can check out this simple flow chart to help you choose.
Strategies to save faster
Once you know how much you need and where to put your money, the next step is finding ways to grow your down payment fund as quickly as possible.
Set a savings goal and timeline
Before you start cutting expenses or picking up extra work, figure out your target number and when you'd like to reach it. Having a clear goal — say, $35,000 in 3 years — makes it easier to break the total into manageable monthly contributions and track your progress along the way.
Automate your savings
Set up automatic transfers from your chequing account to your dedicated down payment savings account on each payday. When the money moves before you have a chance to spend it, saving becomes the default rather than something you have to remember to do.
Cut unnecessary expenses
Yes, you deserve a $9 coffee every morning and a Hailey Bieber smoothie at Erewhon during your Los Angeles vacation. But do you need them? Not really. You can make coffee at home. When you actually take a look at the little habitual indulgences we all accumulate, it adds up — sometimes thousands of dollars over the course of a year.
Subscriptions are another good place to look. Do you really need a print copy of The New Yorker to stack beside your bed and never read? Downgrade to the digital subscription. And have you watched anything on Crave since the last season of The White Lotus ended? Pause your subscription until the new one comes out.
Save on rent
For most people, rent is the biggest monthly expense. So if you can find a way to save there, your path to homeownership gets shorter. Maybe you can downsize, get a roommate, or move to a part of town that's a little less exciting — but less expensive. Sacrificing space, privacy, and proximity to axe-throwing bars may be tough at first, but it's temporary.
Pay off high-interest debt
It might seem counterintuitive, but paying off high-interest debt — like credit card balances — can be one of the most effective ways to free up money for saving. The interest you're paying on that debt is almost certainly higher than what your savings are earning, so eliminating it puts more of your income to work toward your down payment.
Boost your income
Whether that's taking on some freelance work, driving for a ride-share service, or setting up a shop to sell your crochet vests for small dogs, an income increase means a savings increase. And when you get a chunk of money — whether it's a tax return, bonus, or generous gift from a relative — fight the impulse to blow it on something fun. Stay focused on your goal and put those windfalls straight into your down payment fund.
Keep your credit score in good shape
This isn't exactly a savings plan, but it will help you when it's time to buy a house. The better your credit score, the better the odds you'll get a lower interest rate on your mortgage, which will save you a lot of money in the long run. Understanding how to choose a mortgage can help you make the most of that advantage.
Save or invest your down payment fund
If you need access to your money in the next 1 to 3 years, a high-interest savings account is a solid option — lower volatility means your down payment won't shrink right before you need it.
If you have more than a few years before you plan to buy, you might consider investing. The stock market and many other investments rise and fall over time, but past studies have shown that historically they have grown significantly over time.
Regardless of whether you decide to save or invest, start as soon as you can and let compound interest do its thing. Keep that account separate from your everyday spending — contribute a set monthly amount, add whatever else you can afford, and then leave it alone.
How to save for a house in a year
If you can't stand to rent one more minute but don't have a down payment saved up, you're going to have to tighten the belt a bit more. Probably more than you're thinking.
Get rid of your car, if you can
Can you carpool, cycle, or use public transport instead? Selling your car and saving on insurance and maintenance gives a huge boost to your savings. (Walking more helps you save on gym memberships, too.)
Choose high-yield, low-risk investments
For short-term goals, consider putting your money in high-yield, low-risk investments, since you'll be more protected against the market's fluctuations.
And if you're truly committed to an aggressive 1-year timeline, think about other temporary measures too. Cutting back on holiday spending, skipping a vacation, or even moving in with family for a stretch can dramatically accelerate your savings. These aren't permanent lifestyle changes — they're short-term trade-offs that can shave months off your timeline.
Start your savings journey today
Saving for a home can feel overwhelming, but every small step brings you closer. Start by figuring out how much you need for a down payment, open a tax-advantaged account, and set up automatic contributions — even modest ones. The earlier you begin, the more time your money has to grow.
You don't need to have it all figured out right away. Pick one strategy from this article, put it into action this week, and build from there.
