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Q & A: Pre-Construction Condos & Deposit Structures

Q & A: Pre-Construction Condos & Deposit Structures

Q: For pre-construction condo purchases, what is the typical payment schedule like?
                                                                                                                                                           – Jimi A.

A: Hi Jimi,

For pre-construction condominium purchases the deposit and payment schedules can vary greatly between projects. Typically, most builders require a 20% downpayment payable from 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:

  1. $5000 on initial signing
  2. Balance to 5% in 30 days
  3. 5% in 120 days
  4. 5% in 365 days
  5. 5% in 540 days
  6. 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. 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, but more often than not 20% is the industry standard.

Here’s another real life example to show you the variation from project to project. This one is from HOT Condos in Mississauga:

  1. $7500 on initial signing
  2. Balance to 5% in 30 days
  3. 2.5% in 180 days
  4. 2.5% in 360 days
  5. 5% on occupancy

As you can see, HOT Condos has quite a different structure with the total deposit in this case reaching 15%. In fact, this is just the structure for 1-bed condos in the project (the only difference for the 2-beds is $10,000 on initial signing). Either way, prospective owners should budget for between 15% to 25% as a deposit and really should have the money available at the time of signing. You really don’t want to risk having to raise quite a significant amount of capital at a future date. If you cannot meet the terms of the agreement, you risk losing all of your deposits.

While we’re on the topic, there’s a lot of interesting pre-construction projects that are happening in really family-friendly neighbourhoods that boast great schools. Most visitors to this site have come for the great and thorough information on Mississauga schools for their families, but from an investment standpoint there are some really interesting projects. There are always families moving from all over who want the vibrance and convenience of the city, mixed with the safety and great education of the suburbs. Most people just can’t find that in the City Centre here in Mississauga because the schools in that area are generally much weaker. However, there’s a growing list of great pre-construction projects entering amazing neighbourhoods. Check out the list below for projects I recommend taking a further look at from an investment standpoint. Most of them are still in pre-registration phase, so contact us below to get more information.


STREETSVILLE

1. Streetsville Village Residences by Dezen (pre-registration phase)

2. Kingsmill by Forest Green (pre-registration phase)

CENTRAL ERIN MILLS

1. Daniels Erin Mills (official launch slated for Spring 2014)

2. Downtown Erin Mills by Pemberton (currently selling!)

3. HOT Condos by Great Gulf (currently selling Phase 1 & 2 with Phase 3 launching in September)

LAKEVIEW

1. Atwater Condos (pre-registration phase)

For more information on these projects, get in contact by leaving a comment below!

About Mike Santos

Mike's strong analytical and marketing foundations make a him key guest contributor to the website. Combined with his knowledge of all things Mississauga, Mike's thoroughness provides prospective homeowners with the wide-ranging information and perspective they need during an otherwise emotional process.

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