When buying pre-construction with a builder in Ontario, it is prudent to read over the purchase agreement to undersand what the out-of-pocket costs are at interim closing and title closing during the 10 days rescission period, and to also get a lawyer to review the Purchase Agreement during this period.
These costs can vary greatly depending on who the developer is. The 10 days rescission period is in accordance with the Condominium Act. The 10-day clock starts ticking on the date you receive the disclosure statement from the developer or the date that you receive the agreement of purchase and sale that has been signed by both you and the developer, whichever is later.
OCCUPANCY FEE
The term “phantom rent” is used to describe occupancy fee paid to the builder at Interim closing. This amount to the builder from the time you occupy the unit to title closing can typically range anywhere from 3-6 months, but can be longer if title registration is delayed. It’s important to note occupancy fee paid to the Builder does not credit towards the down payment of your purchase. Speak to your REALTOR® for detailed explanation.
APPRAISAL FEE
When you apply for a loan, home appraisals are used to protect the lender’s interest. Typically the lender won’t lend more than the home’s appraised value. The cost of an appraisal is approximately $150-$350.
LAND TRANSFER TAX
Land Transfer Tax is specific to each province and is the % of the purchase price. First-time Buyers in Ontario can qualify for a rebate of up to $2,000 and in the City of Toronto up to $3,725 based on the cost of your home.
DOWNPAYMENT
A Downpayment can be as little as 5% of the purchase price, but you will be subject to the CMHC insurance premium as a high-ratio mortgage. The premiums can range from as low as 0.5% to as high as 7.0% depending on the the size of the loan. This premium can be paid upfront at closing, or rolled over to the balance of your mortgage. If you have 20% down, this insurance is not required. Speak to your lender or mortgage professional for clarifications. More Information can also be found at the CMHC website.
LEGAL FEES AND DISBURSEMENTS
Legal fees can range anywhere from $800-$1,300 plus HST and disbursements depending on complexity and value of the purchase. Shop around…not necessary for the cheapest, but a lawyer that will represent your best interest.
OTHER LEGAL FEES
Purchaser may be subject to legal fees relating to the mortgage. For new construction purchase, there are two closings: interim closing at possession and title closing when the condominium is registered. Legal cost can increase due to more documentation. It is prudent to ask whether the quote for fees by your lawyer includes both closings. The Builder may roll over the cost of municipal fees and levies, and the Builder’s closing cost to the purchaser. It is important to hire a lawyer during the 10 days rescission period to go through the fine points of the Offer to Purchase before the offer is firm.
TARION NEW HOME WARRANTY REGISTRATION FEE
Most new construction in Ontario are covered by a new home warranty program. Should the Builder default or fail to build to an agreed-upon standard, the warranty fund will finishe or repair the deficiencies to a maximum amount. Tarion Warranty Enrolment Fee is calculated based on the purchase price. For a newly constructed condo between $300,000-$350,000 purchased from a Builder, the Enrolment fee is $710+HST. The calculation table can be found on http://www.tarion.com
PROPERTY AND TITLE INSURANCE
The purchaser is required to have property fire insurance in place on closing day if you are applying for a loan. Your lawyer will also recommend that you get Title Insurance in case of defects of title to the property. The fee is a one time premium. For a home purchase less than $500,000, the fee is $325. Above $500,000, the fee is $325.00 plus ($0.90 per every additional $1,000.00 in purchase price above $500,000) OR (Price less $500,000 / 1,000 x .90) plus $325.00. Speak to your lawyer about the amount you should expect.
ADJUSTMENTS
Adjustments are costs associated with what the Vendor has prepaid (ie. Prepaid property taxes, development charges, 3 months common element fee for reserve fund, utility hookup fees for water and electricity, administrative fee etc.). At closing, your Lawyer will work out the adjustments, and provide the Buyer with a statement.
NEXT STE |
BUYING NEW CONSTRUCTION IS NOT THE SAME AS BUYING RESALE
Every Builder operates differently when it comes to drafting the standard offer. They each have their own set of rules that can change at any time once the development is launched for sale. Purchasing a new construction is also very different from purchasing a resale. The above is just some of the common closing costs that can be embedded in the fine points of a purchase agreement from a Builder.
BUILD YOUR TEAM TODAY
Not all realtors have experience in new construction sales. The Builder’s sales representative are not responsible to look after your best interest. We recommend purchasers of new construction to hire an experienced realtor and a lawyer who is familiar with dealing with the nuances of new development purchases to represent your best interest from pre-purchase to final closing.
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