Using a TFSA to save for a home
The Tax-Free Savings Account (TFSA) is the flexible all-rounder: your money grows tax-free and you can take it out any time, for any reason. Here's how that compares to saving in an ordinary account.
The flexible all-rounder
The Tax-Free Savings Account (TFSA)lets your money grow completely tax-free, and you can withdraw it any time, for any reason, with no tax. Even better, any amount you take out is added back to your contribution room the following year. That flexibility makes it ideal for a down payment — and unlike the FHSA, you don't have to be a first-time buyer.
What the tax-free part is worth
The benefit is the tax you don'tpay on growth. Here's a rough comparison of saving the same amount in a TFSA versus an ordinary taxable account over ten years:
| After 10 years | Taxable account | TFSA |
|---|---|---|
| You contributed | $50,000 | $50,000 |
| Investment growth | $15,000 | $15,000 |
| Tax on the growth | –$3,000 | $0 |
| You keep | $62,000 | $65,000 |
Same contributions, same growth — but the TFSA keeps the tax that the ordinary account loses. Over a bigger balance or longer time, the gap grows.
What it means for your mortgage
That tax-free balance becomes a bigger down payment. Here's how a $65,000 TFSA changes the mortgage on a $500,000 home, versus a 5% down payment:
| 5% down | With the TFSA | |
|---|---|---|
| Down payment | $25,000 | $90,000 |
| Mortgage (amount borrowed) | $475,000 | $410,000 |
| Monthly payment | $2,899 | $2,503 |
| Total interest over 25 yrs | $394,808 | $340,782 |
- Total interest paid
Using the account, your monthly payment is about $397 lower and you pay roughly $54,026 less interest over the life of the loan.
Where it fits
A common plan is to fill the FHSA first (for the tax deduction), then use the TFSA for the rest — or rely on the TFSA entirely if you're not a first-time buyer. For money you'll need within a year or two, keep it in safe, stable holdings.
See what your savings buy on the mortgage calculator.
This page is general educational information to help you think it through — not financial, tax, or legal advice. Your own situation is unique; consider speaking with a qualified adviser before making a big decision. See how we calculate and our Privacy Policy.