Pre Construction Condo Down Payment When we decide to purchase the investment property we first decide if we will buy a new condo means a pre- construction or we will buy a resale one which will close sooner than the pre-construction condo. And the major difference is the down payment. And that is something to consider when we are investing as that might change a lot of things. How it works: One of the main differences when purchasing a pre-construction condo versus a resale condo, is the way it is financed. On a resale condo, you can put down as little as 5% towards the purchase price. On a pre-construction condominium, however, you are often required to have at least a 10%- 20% down payment. That amount may seem high but the full payment is broken up into smaller installments, made in what is usually referred to as the deposit structure. Here is an example of a typical deposit structure:
- $5,000 with the offer
- Balance of 5% in 30 days
- 5% in 90 days
- 5% in 180 days
- 5% at occupancy
What is Cooling Off Period Fortunately for real estate buyers in Ontario, one notable exception is made under Section 73 of Ontario’s Condominium Act. This exception gives buyers of pre-construction condos a mandatory 10-day “cooling-off” period. During this 10-day cancellation window, buyers are allowed to cancel an agreement of sale and eliminate their buyer’s remorse with no legal or financial ramifications. This 10-day cancellation window does not extend to resale purchases made on MLS and strictly applies to contracts where a pre-construction property is bought directly from a builder. Buyers are allowed to sever the agreement for any reason, from a change of heart to concerns about finances or the neighbourhood (it helps that the reasons do not need to be publicly disclosed). One thing we have to mention is that whether or not you are given a cooling off period, and the number of days that one gives you, varies from province-to-province. For example, the cooling off period is 10 days in Ontario and 7 days in British Columbia. In most other provinces, the cooling off period is builder dependent. You should also have your Agreement of Purchase and Sale reviewed by your real estate lawyer, during this time. That helps you with any small details mentioned in the agreement that you might not be aware of and a lawyer can explain to you in detail. You should try and get the lawyer review done by a lawyer who deals in pre-construction instead of resale real estate lawyer.
Pre Construction Condo Closing costs Closing costs are additional expenses that you will need to pay for, between the time you make an offer and the day that you close, including: a home inspection fee, legal fees, land transfer tax, CMHC insurance. It is suggested that most buyers prepare to budget and save another 1.5 – 4% of the purchase price of their homes, in order to cover their closing costs. When you buy a pre-construction condo unit, however, that number can be even higher. When you buy a new condo, you may be subject to additional fees, including:
- Development levies ($0 -$4,000)
- New Home Warranty Plan enrolment fee ($900-$1,200)
- Utility hook-up fees ($50-$500)
- Assignment fees (if you sell before final closing, or flip your unit) ($3,000)
- Occupancy fees