"The pre-approval process is the regular process for somebody who is buying a property in the next 90 days," says Militsa Fiuza, a mortgage broker with Invis in Toronto. "It's just that if their financial situation gets any worse, the pre-approval is virtually worthless.
When you're buying a condo from plan, Ms. Fiuza says, the builder usually requires you to have 20%-25% down. "The initial 5% is paid when you sign the purchase and sale agreement, and the remaining is in instalments starting in the next four to six months."
While you cannot always control whether or not you lose your job, she says, it is essential to be aware of things you can control, such as new debts and major purchases that will affect your credit score while the condo is being built.
This is particularly important if you purchase before ground is even broken. The time between signing the purchase and sale agreement and registration can be long and unpredictable. Waiting, however, can have its upsides.
"The timeframe of purchasing a condo also allows buyers to save more money to put down," says Mira Tomljenovic, principal with In2ition realty in Mississauga.
If you have been offered a job out of town or your personal or financial situation has changed and you no longer want to own the new condo, your options are limited prior to registration, when you have title to the place.
"Most agreements provide that the purchaser is not entitled to terminate the agreement and get his money back," says Leor Margulies, head of the real estate group at Robins Appleby & Taub LLP in Toronto. "He's not even entitled to flip the unit or assign his or her purchase agreement until he closes."
If there is no assignment clause, it may be worth asking the builder if they are willing to take back your place or resell it.
"Most developers will not want you to market [your condo] because it will reduce the value of any unsold units," says Mario Deo, vice-president of the Toronto chapter of the Canadian Condominium Institute. However, Mr. Deo says, in a strong market where all or most of the units in the building have sold, the builder may allow re-sale.
"Assignment clauses... are generally with a fee and the builder's approval. The purchaser can sell the paper to someone and get their original investment back," Ms. Tomljenovic says. "If by any chance they can't close on the condominium purchase, they usually lose their deposit. It is all at the discretion of the builder."
It's important to budget enough money to pay occupancy fees for the period between moving in and registration. Occupancy fees are monthly and consist of maintenance fees, taxes and the monthly interest component, Ms. Tomljenovic says. The money you pay during this period does not reduce the amount you owe on closing.
Source: Helen Morris, National Post
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