The Ultimate Guide to Savings Plans for First-Time Homebuyers in 2025

Entering the real estate market as a first-time homebuyer can be both an exciting and daunting experience. With the dream of owning your own home in sight, the next big hurdle is saving for a down payment. If you’re feeling overwhelmed about how to start, don’t worry—you’re not alone. In this post, we’ll walk you through how to save for your first home and highlight some valuable government programs and account options that can help you along the way.

Why Saving for a Down Payment is So Important

When you’re buying your first home, the down payment is typically one of the biggest expenses you’ll face. The down payment is a percentage of the home’s purchase price that you pay upfront, and the larger your down payment, the lower your mortgage payments and interest costs will be. In Canada, a minimum of 5% down is required for homes under $500,000, while properties between $500,000 and $999,999 require a minimum of 5% for the first $500,000 and 10% for the remainder.

While you may be eligible for a mortgage with a smaller down payment, putting down more will help you avoid additional fees, such as mortgage insurance, and potentially make your mortgage application more attractive to lenders.

But don’t worry—it’s completely possible to save up for a down payment with a little planning, discipline, and a smart approach. Let’s dive into some key strategies that can help you build your savings in 2025.

1. Make a Budget, Set a Goal, and Cut Back on Unnecessary Expenses

The first step in any savings plan is to create a budget. Start by evaluating your income and expenses to get a sense of where your money is going each month. Identify areas where you can cut back—whether it’s eating out less, cancelling unused subscriptions, or finding more affordable alternatives for certain services. Every little bit helps, and even small changes can add up quickly over time.

Once you’ve got a clearer picture of your finances, set a specific down payment savings goal. This goal should be based on the price range of homes you're interested in. For example, if you’re looking at homes around $450,000, a 5% down payment would be $22,500. If you aim to purchase a property closer to the $600,000 range, a 5% down payment for the first $500,000 would be $25,000, plus an additional 10% on the remaining $100,000, which comes to $10,000—totaling $35,000.

With your goal in mind, break it down into smaller, manageable savings targets. For example, if you need $35,000 and want to save in two years, you’ll need to set aside about $1,458 per month.

One of the simplest ways to boost your savings is by reducing discretionary spending. This might include limiting dining out, brewing your coffee at home instead of buying it daily, or pausing costly memberships or subscriptions you don’t use often. For instance, swapping a $5 daily coffee run for a home-brewed alternative could save you around $150 a month. Over a year, that’s $1,800 you could redirect towards your down payment savings. Small sacrifices now can make a significant difference in the long run.

2. Start an RRSP or Use Your First-Time Home Buyer Incentives

In Canada, the government offers several programs to help first-time homebuyers save for their down payments, and the best place to start is often your RRSP (Registered Retirement Savings Plan). But wait—why use your retirement savings to buy a home? The reason is that the Canadian government allows you to borrow up to $35,000 from your RRSP through the Home Buyers' Plan (HBP) to use towards the purchase of your first home. This can be a huge boost to your savings.

Here’s how it works:

You can withdraw up to $35,000 per person (so $70,000 for a couple) from your RRSP to buy your first home.

The amount withdrawn must be paid back over 15 years, starting in the second year after your withdrawal.

The best part? Your RRSP contribution is tax-deductible, meaning you’ll get a tax refund for the amount you contribute, which can be used to further boost your savings.

Make sure to follow the rules when using the HBP, such as ensuring the funds are withdrawn within 30 days of the home purchase and that you meet all the eligibility requirements.

3. Open a Tax-Free First Home Savings Account (FHSA)

Starting in 2023, a new account was introduced to help first-time homebuyers save even more efficiently: the First Home Savings Account (FHSA). Similar to a TFSA (Tax-Free Savings Account), this account allows you to contribute up to $8,000 per year, with a lifetime contribution limit of $40,000.

What makes the FHSA particularly appealing is its tax benefits:

Contributions to the FHSA are tax-deductible, which means you can reduce your taxable income for the year you contribute.

The growth in your FHSA is tax-free, and withdrawals to purchase your first home are also tax-free.

You can use the FHSA in combination with other programs like the Home Buyers' Plan (HBP) for even more savings.

The FHSA is a great option if you’re planning ahead and want to make your savings grow faster without worrying about tax implications down the line.

4. Set Up a High-Interest Savings Account (HISA)

If you prefer a simple, low-risk option to save for your down payment, a High-Interest Savings Account (HISA) might be right for you. A HISA is an easy-to-open account that typically offers higher interest rates than a regular savings account, allowing your savings to grow over time.

While interest rates may not be as high as other investment options, a HISA is a safe choice because your savings are insured by the Canada Deposit Insurance Corporation (CDIC) up to $100,000. This makes it a great place to park your down payment funds while earning some interest on the side.

To maximize the benefits of your HISA, shop around for the best interest rates and look for accounts with no monthly fees. It’s important to be mindful of any minimum balance requirements or withdrawal limits that could affect your savings progress.

5. Automate Your Savings

One of the most effective ways to stick to your savings goals is by automating the process. Set up an automatic transfer from your checking account to your savings account each payday. By doing so, you’ll ensure that you’re consistently putting money aside for your down payment without having to think about it every month.

You can also set up automated transfers to your RRSP or FHSA if you’re using those accounts to save for your home. Automation removes the temptation to skip a savings contribution and helps you stay on track to meet your goal.

6. Take Advantage of the First-Time Home Buyer Tax Credit (HBTC) and GST/HST New Housing Rebate

When purchasing your first home, it’s essential to explore tax benefits and rebates that can help reduce your overall costs. Two valuable resources for first-time homebuyers in Canada are the First-Time Home Buyer Tax Credit (HBTC) and the GST/HST New Housing Rebate.

First-Time Home Buyer Tax Credit (HBTC):

The HBTC is a non-refundable tax credit available to eligible first-time homebuyers. As of 2023, the credit amount is $10,000, which can result in a tax savings of up to $1,500 (calculated at a rate of 15%). This credit is designed to help offset some of the costs associated with purchasing a home, such as legal fees and land transfer taxes.

To qualify, you or your spouse/common-law partner must not have owned a home in the previous four years, and the home must be your principal residence within one year of purchase. Be sure to claim this credit on your tax return to take full advantage of the savings.

GST/HST New Housing Rebate:

If you’re purchasing a newly built home or substantially renovating an existing one, you may be eligible for the GST/HST New Housing Rebate. This rebate allows you to recover a portion of the GST or HST paid on the purchase price or renovation costs of your home.

Eligibility criteria and rebate amounts vary depending on the province and the type of property, so it’s important to check the specific requirements in your area. For example, in Ontario, you can claim a provincial rebate in addition to the federal rebate, potentially saving you thousands of dollars.

These programs can significantly reduce the financial burden of buying your first home, so be sure to research and apply for any credits or rebates you’re eligible for.

Conclusion

Saving for a down payment as a first-time homebuyer can seem like a daunting task, but with the right strategies, it’s entirely achievable. Start by creating a budget and setting a savings goal, then take advantage of helpful programs like the RRSP Home Buyers' Plan, First-Time Home Buyer Tax Credit, GST/HST New Housing Rebate, and the First Home Savings Account to maximize your savings. Pair these tools with smart saving techniques like automating your deposits and cutting back on unnecessary expenses, and you’ll be well on your way to reaching your homeownership goal in 2025.

Whether you’re buying a condo downtown or a house in the suburbs, remember that every small step you take towards saving for your down payment brings you closer to your dream of homeownership. With a bit of patience, discipline, and the right tools, you’ll be holding the keys to your first home before you know it.