Pre Construction Condo Payment Schedule: Deposit Structure

by Richard Morrison
January 29, 2020
Buying
0

Table of Contents show

The Deposit Structure When You Buy A Pre-Construction Condo

Navigating the world of pre-construction condominiums can be a mountainous task, especially when it comes to understanding payment schedules. Did you know presale property deposit amounts often range from 15-25%, unlike resale properties which demand only a standard 5%? This blog will deep-dive into Pre Construction Condo Payment Schedules, helping you understand important aspects like deposit structures and down payments with clarity.

Get ready – owning your dream condo just got easier!

Key Takeaways

Pre construction condo deposit amounts typically range from 10% to 25% of the purchase price, unlike resale properties which usually require only a standard 5% deposit.
A minimum deposit of at least 20% is generally required for investment purchases of pre construction condos.
Pre-construction condo deposits are typically held in a trust account, ensuring that the buyer’s funds are protected and separate from the developer’s funds.
The deposits are refundable if buyers decide not to proceed within the 7 day rescission period.
Working with a real estate agent who is experienced in presale purchases can provide valuable guidance throughout the process, including negotiating favorable terms and helping navigate complex deposit structures.

Read More:

Understanding Pre Construction Condo Payment Schedule

In order to navigate the world of pre construction condos, it’s important to have a clear understanding of the payment schedule involved. This includes knowing the difference between a deposit and a down payment, as well as the minimum deposit required for purchasing a presale property.

Deposit vs. Down payment

Navigating the world of pre-construction condos involves understanding key financial terms and how they influence your bottom line. A deposit is an integral part of securing your future condo, often ranging from 15% to 25% of the purchase price, but sometimes as little as 5%.

Unlike in resale properties where a lump sum payment is made upon agreement, for pre-construction units, deposits are typically scheduled over time. This could be $10,000 with the offer acceptance then a balance distributed at various milestones e.g., after three months or on reaching specific construction stages.

On the other hand, a down-payment – commonly set at 20% minimum for investment purchases – impacts your mortgage amount and monthly payments once you fully own the unit. Balancing these two financial commitments wisely can ease condominium acquisition process while maximizing your investment potential.

Minimum deposit required for a presale property

Taking the plunge into a presale property often requires a heftier upfront financial commitment than with resale properties. Generally, developers require buyers to pay between 10% and 25% of the total price as a deposit.

This can differ depending on the real estate market and developer policies, but you may even encounter scenarios where only a 5% deposit is required or in rare cases up to 30%. However, if you’re planning on purchasing your presale property as an investment venture, be prepared for lenders to typically ask for at least a 20% down payment.

Pay attention to these details when calculating your finances for securing that promising pre-construction condo from Bridgewell Real Estate Group or any other preferred developer.

Importance of the 7-day Rescission Period

A cornerstone of the presale home buying process in British Columbia is the 7-day rescission period. This critical window allows buyers a full week to review and digest all details of their pre construction condo payment schedule, as well as other terms in the contract of purchase and sale.

During this time frame, potential homeowners can evaluate whether or not to proceed with their investment property decision. What if you have second thoughts? Rest easy – within these seven days, those experiencing buyer’s remorse can opt for cancellation without penalty and receive their initial deposit money back.

As such, it ensures that your real estate goals are met with no hasty compromises or hurried decisions; you’re firmly seated in the driver’s seat during this crucial period.

Deposit Payment Methods and Safeguards

Presale property deposits are typically held in a trust account, ensuring the safety of the buyer’s funds.

How deposit payments are held

The deposit payments for pre construction condos are held in a trust account, typically managed by the developer’s realtor’s brokerage or the lawyer of the developer. This ensures that the buyer’s deposit is protected and separate from the developer’s funds.

The money is securely held until it is needed for the completion of the project. It’s important to note that these deposits are fully refundable in case of project cancellation, providing buyers with an added level of protection.

Bank drafts or wire transfers are often used for deposit payments, rather than personal checks, to ensure a secure and efficient transaction process.

Can the developer use the deposit?

The deposit for a pre-construction condo is held in a trust account, which means that the developer cannot use it for their own purposes. The purpose of the deposit is to provide the seller with a sense of security and to ensure that the buyer is committed to the purchase.

It acts as a safeguard and shows good faith on the part of the buyer. The deposit money goes towards the purchase price of the unit and is fully refundable if buyers decide not to proceed within the BC 7 day rescission period.

Rest assured, your deposit will be protected and used solely for its intended purpose when purchasing a pre-construction condo.

The Role of a Real Estate Agent in Presale Purchases

A real estate agent plays a crucial role in presale purchases, acting as a guide and advocate for buyers throughout the process. They have extensive knowledge of the local market and can provide valuable insights into pre-construction projects, helping buyers make informed decisions.

One key benefit of having a real estate agent is their ability to negotiate on your behalf. They can help secure favorable terms and conditions, ensuring that you get the best possible deal when purchasing a presale property.

Additionally, an experienced agent will review all contracts and legal documentation to ensure everything is in order before you proceed with the purchase.

Another important aspect where agents excel is in navigating complex deposit structures. With their expertise, they can explain these structures in simple terms and help you understand how your payments will be spread out over time.

They also ensure that deposits are made correctly to the right entity at the right time, giving you peace of mind throughout the payment process.

Overall, working with a real estate agent experienced in presale purchases can be incredibly beneficial. Their expertise and guidance will assist you in finding the perfect pre-construction condo while ensuring that your interests are protected every step of the way.

Understanding Deposit Structures

Understanding deposit structures is crucial when purchasing a pre-construction condo. From basic to extended deposit schedules, knowing the payment timeline will help you plan your finances accordingly.

Read on to learn more about pre-construction condo deposits and how they work.

Basic Deposit Structure

The basic deposit structure for pre-construction condos allows buyers to make their payments in increments over a period of time. Typically, the initial deposit is made with the offer, which can range from a few thousand dollars up to a specific percentage of the purchase price.

After that, additional deposits are usually required at specific milestones throughout the construction process. For example, buyers may need to make a 10% balance payment within 7-10 days of acceptance, another 5% at the 3-month mark, and further payments at intervals like the 12-month mark and 18-month mark.

This staggered approach gives buyers more flexibility in managing their finances while securing their investment in a pre-construction condo.

Extended Deposit Structure

An extended deposit structure is a payment schedule for pre construction condos that allows buyers to spread out their deposit payments over a longer period of time. This can be beneficial for buyers who may not have the funds readily available to make larger upfront deposits.

Typically, an extended deposit structure involves paying smaller percentages of the total purchase price at specific milestones during the construction process. For example, instead of making a 20% deposit all at once, an extended deposit structure might include a 5% initial deposit with the offer, followed by additional 5% payments at different stages of completion (such as when framing begins or when windows are installed).

This gives buyers more flexibility and time to save up for each installment. It’s important to note that the specific terms of an extended deposit structure can vary depending on the developer and project, so it’s always crucial to carefully review and understand your contract before committing to any payment schedule.

Pre-Construction Condo Deposits and Fees Explained

Learn about the ins and outs of pre-construction condo deposits and fees – from down payments to closing costs, we’ve got you covered. Dive into the details and make sure you’re prepared for your presale purchase journey.

Down-payment & Deposits

Presale properties require a deposit instead of a traditional down payment. The deposit for pre-construction condos is typically paid in installments over a specific time period, unlike resale properties where the entire deposit is due upon subject removal.

The amount of the deposit can vary but usually ranges from 15-25% of the purchase price, with a minimum requirement of 5% and maximum cap at 30%. For investors purchasing presale properties, a minimum down payment of 20% is typically required.

An example structure for a pre-construction condo’s deposit schedule could be $10,000 with the offer, 10% balance within 7-10 days of acceptance, followed by additional installments at the 3-month mark, 12-month mark, and 18-month mark.

It’s important to understand these unique deposit requirements when considering buying a presale property and ensure that payments are made within the designated timeframes to secure your investment opportunity.

Cooling-off Period

During the pre-construction condo purchasing process, buyers are provided with a 7-day cooling-off period. This crucial timeframe allows buyers to carefully consider their decision and review all aspects of the purchase before fully committing.

It serves as a safety net for buyers, giving them the opportunity to back out of the contract without any penalties or financial loss during this specific time period. This cooling-off period is designed to protect buyers from making hasty decisions and ensures that they have ample time to evaluate their investment and make an informed choice about moving forward with the purchase.

Closing Costs

Closing costs are an important consideration when buying a pre-construction condo. These costs include various fees and expenses that need to be paid at the final stage of the purchase process.

Some examples of closing costs for a pre-construction condo may include legal fees, development and educational levies, home inspection fees, utility hook-up fees, new home warranty plan enrollment fee, and even land transfer tax.

It is essential for buyers to budget for these additional expenses on top of the purchase price and deposit amount. By being aware of these closing costs upfront, buyers can avoid any surprises and properly plan their finances for a smooth transaction.

FAQs:

What is the Cooling Off Period?

The cooling off period is a specific period of time granted to buyers to reconsider their purchase decision without any financial penalty.

What is Occupancy and Occupancy Fee?

Occupancy refers to the period when a buyer is allowed to occupy their unit before the condominium project is fully completed.

What are Closing Costs?

Closing costs are additional expenses that buyers need to pay when purchasing a pre-construction condo. These costs can include land transfer taxes, legal fees, title insurance, and other government fees.

Q: How does the deposit structure work when you buy a pre-construction condo?

A: When purchasing pre-construction, deposit structures vary depending on the builder. Generally, a larger deposit is needed at the beginning of a project than a resale condo. As occupancy nears, the buyer may need to pay an occupancy fee and will usually have an agreement of purchase and sale with 180 days from when the condo is built until it is ready for occupancy. In Ontario, there is also a 10-day cooling off period where buyers can have their agreement of purchase and sale reviewed by their lawyer. The buyer must also have their finances in order and make sure they are ready to go ahead with the purchase before they sign any documents.

Q: What are occupancy fees and when do I need to pay them?

A: Occupancy fees are charges that apply to condo units that are occupied prior to full completion of construction. The amount varies depending on the builder but generally increases as occupancy nears. Usually, within 10 days of signing an agreement of purchase and sale, buyers will need to start paying these fees in order to begin occupying their unit during the interim occupancy period.

Q: Do condos come with HST?

A: Yes, condos are subject to HST regardless if it’s purchased pre-construction or resale. Buyers looking to purchase pre-construction should ask about what kind of fee structure is in place with the builder for HST.

Q: How much money do I need up front for buying a pre-construction condo?

A: Generally speaking, buyers should expect to pay around 5% of the total cost upfront towards a down payment when purchasing pre-construction. This number may extend or even reduce depending on your mortgage lender so it’s important to get your finances in order and make sure you’re ready to go ahead with the purchase before signing any documents.

Q: Is there a cooling off period when I buy a pre-construction condo?

A: Yes, most jurisdictions across Canada have some sort of cooling off period where buyers can review their Agreement of Purchase and Sale before signing final documents. In Ontario specifically, this cooling off period is 10 days long.

Q: What happens if I change my mind during my cooling off period?

A: If you decide you no longer want to proceed with purchasing your pre-construction condo during your cooling off period (10 days in Ontario), then you will get your deposit returned without deduction. However, this isn’t always true so it’s important that you read all documents regarding deposits carefully before signing anything.

Q: How long does it take for me to move into my new condo after closing?

A: The length of time between closing and moving into your new condo depends on how far along in construction it is at time of closing. Generally speaking though, most builders give buyers an estimated date for occupancy which can range anywhere from 30 days after closing up until over 12 months afterwards.

Q: Are there any extra costs associated with buying a new condo?

.A: Yes! Aside from your mortgage payments and regular monthly expenses such as hydro bills or internet service bills, condos come with common expenses such as condo fees which cover all maintenance costs around the building such as snow removal or landscaping services.. Additionally, if you’re buying pre-construction then there may be additional costs such as occupancy fees that need to be paid before taking possession.

Q : Is there anything else I should be aware of before purchasing a Pre-Construction Condo

A : Definitely ! Make sure that you understand how Deposit Structures work , what documents you’ll be required to sign , what kind of Pre – Approval process needs to be done prior , what kind Fees Structure applies (if any) , whether any Reserves Funds are necessary , etc . It’s also important that you understand exactly how long the Cooling Off Period lasts (in BC , this is 7 Days ) so that you can ensure proper Lawyer Review takes place . Finally , once everything has been Purchased & Sold reviewed by both parties , make sure all documents are signed correctly & accurately so that everything goes smoothly & quickly .

Conclusion

In conclusion, understanding the pre construction condo payment schedule is crucial when purchasing a presale property. The deposit structure, the 7-day rescission period, and the role of a real estate agent are all important factors to consider.

By familiarizing yourself with these aspects and ensuring deposits are made in a timely manner, you can navigate the process smoothly and secure your dream investment property.

Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.

Lets Have a Smart Conversation.

Let's Chat! Looking for a REALTOR© who can exceed your expectations? Look no further than Richard Morrison! His mission is to serve without limit & provide solutions that cater to your core needs.
* 20+ Years of Experience
* Medallion Member
* RE/MAX Hall of Fame

Date

Time

Your Contact Details

Name

Phone

Message

Your Privacy is important to us. View our Privacy & Data Collection Policy.

Latest Vancouver Listings

Bed: 1Bath: 1Built in 1997638 sqft

7 days ago