Q & A Series – Part 2
Q: What is the typical pre-construction deposit structure like?
– Jimi A.
I’m going to assume Jimi is speaking of a pre-construction deposit structure for condominium purchases, as the deposit structure and payment schedules can vary greatly between freehold and condo projects. Typically, in pre-construction condo projects, builders require a 20% downpayment payable from the day of signing until completion of your unit (aka occupancy). Here’s a real life example of a deposit structure from the condo project “Harbour Plaza” in Toronto:
$5000 on initial signing
balance to 5% in 30 days
5% in 120 days
5% in 365 days
5% in 540 days
1% on occupancy
Generally, a smaller amount is needed on signing and the balance of the first 5% (less the $5000) is due after 30 days. After 18 months, the 20% downpayment would be deposited to the builder. That amount is held in trust until completion of the project where it would then be transferred to your mortgage downpayment when title is officially transferred to you.
Some projects also require a further downpayment when you take possession of your unit which can vary from 1-5%. However, keep in mind that different projects will offer different incentives to attract buyers. The structure of the deposits might change or some builders may require less downpayment. For example, some projects outside of Toronto in smaller cities or some projects that haven’t been selling as well may ask for as little as 5% down. It all depends on the individual builder’s requirements, but the current industry standard is ~20%.
There is a TON of information to learn about the pre-construction process before deciding to make a purchase. So, if you’d like to learn more or just have a question you’d like answered, leave a comment below or contact me.