Having worked for many years as a Platinum agent in Toronto’s pre-construction condo market, one of the top questions I get asked is how does a pre-construction deposit structure work?
The structure works a bit differently compared to new freehold homes which typically require less over a shorter period of time.
But, let’s take a look specifically today at the pre-construction condo market.
A Typical Pre-Construction Deposit Structure
In pre-construction condo projects, builders typically 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 a condo project 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 collected by 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 on occupancy 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 only 10%-15% down with the final 5%-10% on occupancy. It all depends on the individual builder’s requirements, but you will typically be required to put down ~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 directly.
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