Using your FHSA or RRSP to buy a cottage

The short answer

If the cottage is a getaway and you will keep living in your city home, you cannot use the First Home Savings Account (FHSA) or the RRSP Home Buyers' Plan (HBP) to buy it tax-free. Both programs exist to help people buy the home they live in. The rules are set by the Canada Revenue Agency, not lenders, so there is no workaround through your mortgage.

Why the FHSA does not work for a vacation property

For an FHSA withdrawal to be tax-free (a qualifying withdrawal), the CRA requires all of the following:

• A written agreement to buy or build a qualifying home in Canada before October 1 of the year after the withdrawal.
• You intend to occupy that home as your principal place of residence within one year after buying or building it.
• You meet the FHSA first-time buyer test for a qualifying withdrawal. This considers a home you owned or jointly owned and ordinarily lived in during the relevant period; it differs from the account-opening test and the HBP test. Review CRA’s complete checklist, including Canadian residency and acquisition timing.

Most cottage buyers already own and live in a home, and do not plan to live at the cottage full time. That fails both the first-time buyer test and the principal residence test. A withdrawal that does not meet the conditions may be taxable.

Why the Home Buyers' Plan does not work either

The HBP lets you withdraw up to $60,000 from your RRSP tax-free to buy a qualifying home, then repay it over up to 15 years. The same core conditions apply: a written agreement to buy, an intent to occupy the home as your principal place of residence within one year, and first-time buyer status, meaning you have not owned and lived in another home in the previous four years. A vacation cottage does not qualify.

The exception: the cottage becomes your main home

If you will actually live at the cottage as your principal residence within a year of buying it, the picture changes. Possible examples:

• A first home that happens to be on a lake. A cottage can be the home you actually live in. Eligibility depends on occupancy, property requirements and the programme’s first-time buyer test. See a cottage as your first home.
• Selling the city home and moving up north. If you meet the first-time buyer test (no owner-occupied home in the past four years), the HBP and FHSA may apply. Many retirees will not meet it, since they lived in their own home recently. See retiring to the cottage.

The tax condition is actual occupancy or intent to occupy as your principal place of residence within the programme’s deadline. Calling a weekend place your principal residence on a form is not enough. Separately, the lender and municipality assess whether the building and access support the proposed use.

Talk to Jeff and Emily

Thinking of making the cottage your main home? We can walk through the FHSA, HBP and mortgage side together.

Or call or text 416-628-9682

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Timing if the cottage will be your main home

1. Confirm you meet the first-time buyer test for each program before you sign anything.
2. Sign a written agreement to buy. A mortgage pre-approval does not count as an agreement for the HBP.
3. Make sure the purchase closes before October 1 of the year after your withdrawal.
4. Plan to move in as your principal residence within one year of buying.
5. Choose a cottage you can live in all year, with permanent heat and year-round road access, so both the CRA intent and the lender rules line up.

Regular RRSP withdrawals: allowed, but taxed

A regular withdrawal from an accessible RRSP is generally included in taxable income and does not restore contribution room. Locked-in arrangements have different restrictions. Withholding at withdrawal may be less than your final tax bill. Compare the after-tax cost with an accountant before choosing it as a down payment source.

Sagen lists RRSP withdrawals as an acceptable own-resources source for a seasonal cottage down payment, so lenders will accept it. Whether it is smart is a tax question, so please talk to an accountant or financial planner first.

Two quick examples

• A couple in Toronto who own their condo and want a Haliburton cottage for weekends. Neither program applies. They use savings and a HELOC on the condo.
• A 31-year-old renter who works remotely and buys a winterized cottage near Huntsville to live in full time. They may qualify for both the FHSA and the HBP, as long as they meet each first-time buyer test and move in within a year.

Better ways to fund a cottage down payment

• Savings, TFSA or non-registered investments.
• Equity in your home through a HELOC or refinance. See using your HELOC to buy a cottage.
• Proceeds from selling another property.
• A family gift, where the program allows it.

See every option and the minimums in how much down payment you need for a cottage, or try the down payment calculator.

The HBP withdrawal limit is $60,000 per eligible person. Repayment generally runs over 15 years; the temporary delayed repayment start applies to first withdrawals made in 2022 through 2025. Check CRA’s schedule for the actual withdrawal year, rather than assuming that relief applies to a 2026 withdrawal.