If you’ve decided to purchase a pre-construction condo or a home, you need to understand that financing works a bit differently compared to buying resale. Usually, you need a down payment of 15% to 25% to secure your unit. It seems a lot but the encouraging part is that usually this payment is paid in an extended period, so you don’t have to have the availability of these funds at once.
Deposit for Condo. In almost all new construction projects there is a 10-day cooling-off period. That means that you can walk out of the contract within 10 days without any penalties. This time-period is granted so that the buyer can get the contract reviewed by the lawyer and get a pre-approval of the mortgage which is required by the builder.
Although every contract is unique, the standard deposit structure may be as follows;
$5000.00 with the offer
5% of the purchase price minus the initial deposit within 30 days
5% of the purchase price within 60 to 90 days
5% of the purchase price within 90 to 180 days
5% at occupancy
That means that if you have purchased a condo that costs $400,000, you will pay $5,000 with the offer and $15,000 within 30 days. You will pay the remaining 15% in three instalments according to the agreement.
Deposit for a Freehold Property. The deposit structure for a freehold pre-construction property is usually different from a condo. It is due to the quicker closing date offered by the builder. The total deposit varies from 5% to 15% taken in six months to a year. Like said earlier, all contracts are different and builders may offer different options.
International Deposit Structure. Most of the builders have a different payment structure for international buyers due to the different down payment requirements by the financial institutes. The foreign buyer tax in GTA is also the reason for the different payment structure for foreign buyers. So if you are a foreign buyer, the builder usually requires 30% or more, of the total cost as the deposit.
Monthly Deposit. In order to make their product more appealing to the buyer, some builders offer the monthly payment plan. They do take an initial deposit at the time of the offer and take the rest in monthly instalments until the occupancy or closing. If you don’t have the down payment already saved then this may be your option for buying a property.
There is a lot to learn about the pre-construction process before making a decision to buy, please feel free to contact me if you have any questions!
Post a comment