For the most part, pre-construction condos are usually cheaper than their traditional counterparts, however, they’re still a huge investment. That’s why it’s vital to understand how the payment process works.
Start things off with a pre-approved mortgage
Much like when you are buying a house, the first step to buying a new condo is to get a mortgage.
By securing a pre-approved mortgage before you select your condo, you heighten the chances of bagging your dream place. Not only will a pre-approved mortgage show you the maximum amount you’ll be able to borrow, as well as the interest rate you’ll pay on the principle, it also provides some security for the seller and heightens your chances of sealing the deal.
Pay a deposit or down payment
Whether you are buying a house or a condo unit, you usually have to meet a number of conditions as part of the Agreement of Purchase and Sale, and this includes a down payment. While the terms and conditions will vary property-to-property, condo units tend to ask for a deposit of around 5% of the total cost.
This is a relatively low figure compared to traditional detached homes and condos which often ask for 10% or more. The initial deposit will count towards the first portion of your down payment and is expected to be paid within the first 30 days of purchase. This lump sum will secure the unit for you and assure you won’t abscond from the purchase further down the line.
How the payment schedule works
Once you have made the initial down payment for your pre-construction condo, you will still be expected to pay a further 20-25% of the sale price before you move in. This payment schedule can be spread across 12 to 18 months, depending on the terms and conditions laid out by the seller. While this can vary between projects, a typical payment schedule looks something like this:
5% within 30 days of purchase
5% 4-6 months after purchase
5% 8-12 months after purchase
5% after 540 days or on date of occupancy (whichever is earlier)
Spreading the payment dates over a series of months makes funding a downpayment much easier than shelling out one, large lump sum. Although pre-construction condos do come with a waiting time, they allow the cost to be a lot more accessible to investors and buyers alike.
Other fees to know about
Once you have completed the payment for your condo, you should remember that many buildings also have resident fees which will continue for the duration of your residency. These payments are not usually highlighted in the schedule, but allow for fees relating to: the upkeep of the building, staff and security, and access to amenities including pools, gyms and outside areas.
It should be noted that although these fees cover maintenance and safety concerning communal areas, they do not provide coverage for your unit. This is why all condo owners should take some time to consider investing in a good condo insurance policy on investing in a good insurance policy.