You can purchase a resale property with as little as a 5% down payment. Even when you purchase a brand new home from the builder, the deposit is usually within 5-10%.
When you are purchasing pre-construction condos, almost all the time, you will be looking at paying about a 20% down payment. Perhaps you’re thinking, “I saw a big billboard that said I could buy with 5% down!” That’s usually because the builder has pretty much sold all the units and is trying to get rid of the remaining units or when the project is near completion.
A builder has to sell a certain percentage of units prior to starting construction for them to be able to get funding – hence the term “pre-construction”.
Deposit structures can vary from project to project, but it’s usually broken down something like this:
- around $5000 at signing, balance to 5% within 30 days
- usually about 10-15% within one year
- the remainder is usually spread into 2 payments or at occupancy
With pre-construction condos, you also have 2 closings phases – interim occupancyand final occupancy. When the project is near completion and if the unit you’ve purchased is “move-in” ready, it’s called interim occupancy. At this time, the buyer can move into the unit. The buyer also has to pay a monthly interim occupancy fee which includes a portion of the property tax, maintenance fees and interest payments on the outstanding purchase price. These occupancy fees are not subtracted from the balance of the purchase price. Another way to look at it is as if you are paying a monthly rent to the builder. You are not required to get a mortgage at this time as you do not have title on the property.
The duration between interim occupancy and final occupancy can vary – roughly about 4-8 months. Some can take longer, especially if you are on one of the lower floors. The length of the interim occupancy can vary based on several factors. When the condominium is registered, that’s when final occupancy occurs.
At the time of final occupancy or final closing you will incur most of your closing costs. It is also when you will need to get a mortgage for the balance of the purchase price and receive title. The closings costs can include the following, but again, can vary from one closing to another:
- HST
- Development Levies
- Educational Levies
- Property Taxes
- Land Transfer Tax
- Utility Connection Fees
- Tarion Warranty Enrollment Fee
- Other Miscellaneous Fees
As with any house/investment purchase, it’s always in your best interest to ensure that you’ve reviewed all the costs that come along with it. Some costs can be eliminated or even capped at the time of signing the agreement. It would be ideal to engage with a realtor who is familiar with the process and can guide you through putting in the right clauses.
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