There comes a point in time when we just can’t let go of money-saving habits, despite having enough cash.
For example, you still want to save on a down payment for your first luxury home in Toronto, even if you can afford to pay in full. Perhaps you can already buy one of Downtown’s sought-after addresses or an ultra-luxurious townhome in Lytton Park.
As you stop worrying about higher prices, you inadvertently think about ways to save money on a luxury home purchase. From first-time homebuyer programs to non-profit credit counseling, find out how these can help with saving money on a luxury home down payment in Toronto.
Apply For A First-Time Home Buyer Program
Some first-time homebuyers decide to buy luxury properties in Toronto because there isn’t a significant price difference. As of November 2021, the average sale price in the city increased 21.7% year over year to almost CAD 1.2 million (US $940,000), according to the Toronto Regional Real Estate Board.
If you add another million (US $783,430) to the average price, you could afford to live at 438 Richmond Street. The property in Downtown Toronto features two bedrooms and three bathrooms over 1,700 square feet of space.
The first-time homebuyer incentive program can help you with buying the Downtown property. The Canadian government considers you to be a first-time home buyer in Toronto if:
- You’ve experienced a recent “breakdown of a marriage or common-law partnership.”
- You’ve lived in a property that you haven’t owned in the last four years preceding your application.
- You haven’t owned a residential property, ever.
If you meet any one of the requirements, your annual income mustn’t exceed CAD 150,000 (US $117,552) to qualify for the incentive. The program only allows you to borrow up to 4.5 times your annual income.
Click here to read the full list of requirements and other details for the first-time homebuyer incentive in Toronto.
Use Your Registered Retirement Savings Plan (RRSP)
Many first-time homebuyers are unaware that they can use their RRSPs to augment a down payment. As part of the Home Buyers’ Plan, you can withdraw up to CAD 35,000 (US $27,420) from your RRSP. The Canadian government allows you to take out money from multiple RRSPs, as long as you own all of them.
Keep in mind that you need to comply with the following rules:
- Only first-time homebuyers, as defined by the government, can withdraw from RRSPs.
- A home buyer must have a written agreement for the purchase.
- A home buyer must retain their residency status from an RRSP withdrawal up to the time of purchase.
- A home buyer must live in the property as their primary residence within 12 months after the purchase.
RRSP issuers shouldn’t withhold tax on your withdrawals worth up to CAD 35,000 (US $27,420). Homebuyers, however, should repay the withdrawn amount within 15 years.
Seek Non-Profit Credit Counselling
Luxury home buyers in Toronto can indirectly save money on a down payment by consulting a credit and debt counselor. For instance, the Credit Counselling Society can help you with managing your finances, hence maximizing your cash flow for future expenses.
Non-profit credit counseling also applies to consolidating your debt, which is a good practice before considering a luxury home purchase. Best of all, the service is usually free or only costs a minimal fee.
Now that you know the three little-known ways to save money on a luxury home down payment, it’s time to speak with a qualified broker. Click here to find your local brokerage in Canada.