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Deposit Structures 101 – Your Key to Pre Construction Condo Ownership

Pre construction condos in Canada’s real estate market are a great choice. With housing prices going up and not enough supply, these new projects provide customized living spaces. But, as you start this journey, it’s important to grasp how deposit structure and the costs involved. Our guide will help you understand the financial aspects of pre construction condos. This will empower you to confidently secure your dream home.

Navigating Deposit Structures

Buying pre construction condos is different from buying resale units. One key difference is the down payment amount. Resale condos usually need a 5% down payment. On the other hand, pre construction condos typically ask for 20% or more. Yet, developers often facilitate these payments through structured deposit plans. Such plans, like the 20% down payment example below, make financing more accessible:

  • $5,000 with the offer
  • 5% due in 30 days
  • 5% in 90 days
  • 5% in 180 days
  • Final 5% upon occupancy

The staggered approach provides breathing room for buyers, easing the financial burden.

Cooling-Off Period and Legal Review

Upon deposit, buyers are granted a 10-day cooling-off period in Ontario. This grace period allows for reflection, financial preparation, and legal consultation. It’s smart to hire a real estate lawyer to carefully review the Agreement of Purchase and Sale right now. Be attuned to any developer-specific clauses to avoid surprises.

Understanding Closing Costs

Closing costs are expenses that occur between offer acceptance and closing day. They include things like home inspection, legal fees, and land transfer taxes. Buyers usually set aside 1.5% – 4% of the purchase price for closing costs. However, pre construction condos might have higher expenses. Buyers often explore topics such as Interim Occupancy and potential Assignment Sales at this stage.

Additional Fees and Occupancy

Apart from closing costs, pre construction buyers may have to pay additional fees, such as development levies, warranty plan enrollment, utility hook-ups, and potential assignment fees. Occupancy fees, during the interim possession period, approximate mortgage, condo fees, and taxes. During this phase, although the amenities may be limited, some buyers see it as a smart financial choice.

Condo Reserve Fund and HST

During the closing process, buyers should plan to pay two months’ worth of condo fees into the reserve fund. Pre construction units have HST added to their purchase price, unlike resale condos. This tax consideration warrants professional legal advice.

Strategic Planning and Informed Decisions

Navigating the intricacies of pre construction condo purchases demands careful planning. Evaluate deposit structures, anticipate closing costs, and explore fee structures diligently. An experienced real estate lawyer who knows the developer’s history is very valuable when dealing with it.

Additionally, consider utilizing resources such as mortgage payment calculators and affordability tools. When starting your condo search, remember that staying informed helps make the home buying process easier. Join our Insider’s Club to learn more about pre construction condos and real estate. Curious about Interim Occupancy or Assignment Sales? Find the answers in our dedicated articles.


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