With so many new condos and residential developments coming up in Toronto and the GTA, many buyers are looking into buying new builds. The biggest benefit of a new build over a resale property is living in a fully customizable, mint condition home. However, the down payment process on a new build is different than on a resale.

The bad news is that a down payment on a new build is a lot more than on a resale. With a resale, the minimum down payment is usually 5%, while on a new build it can be up to 25%. Even though this may be daunting, this down payment isn’t required all at once but can be broken up into smaller payments. While the payment schedule can vary slightly depending on the building company, it often looks like this:

  • 5% with offer

  • 5% at 30 days

  • 5% at 90 days

  • 5% at 180 days

  • 5% at occupancy date

Breaking the down payment into several small payments can make it more manageable to the home buyer. When it comes to closing costs, a new build is much the same as a resale property. You will have to pay closing costs, usually between 1.5% to 4% of the cost of the new build. Make sure you speak to a mortgage broker, as well as asking the builder about these costs so you can budget for them. While closing costs typically cover land transfer tax, inspection, and real estate lawyer feels, closing costs on a new build may also include expenses such as development and education charges, and hydro, water, and gas meter installation. These can amount to a lot so it’s important you have at least a ballpark figure before you make an offer. When you make an offer on a new build, you’ll be given both an occupancy date, and a closing date. The occupancy date usually occurs before the closing date, so you will be living in your new home for a period of time before actually owning it. The closing date actually occurs when the entire build is complete, so if you’re moving into a condo, there could be three to six months between your occupancy and closing date. Since you’re not the legal owner of the home until the closing date, you won’t be making monthly mortgage payments yet. Instead the building owner will require “phantom rent,” or an occupancy fee. It’s important to know that this occupancy fee doesn’t go towards your mortgage. Mortgage payments will commence on your closing date, when you become the registered owner of the home or condo. As you can see there are many differences between buying a resale property and a new build. Speak to your mortgage broker, or book a meeting with one of our mortgage professionals in order to better understand the process, and the costs involved. Our experienced mortgage brokers can help you through the down payment process, as well as helping you get the best mortgage rates on the market. Contact us today for more information.