Purchasing a pre-construction property would require understanding your financials and what builders require from your end to proceed with a deal.
What Is a Pre-construction Pre Approval?
A mortgage pre-approval is needed when buying a pre-constructed condo. It is normal for builders to ask you for this letter within your 10 day cooling off period from signing. Builders requires a mortgage pre-approval to ensure that buyers are capable to close on their property. Builders in Ontario may require a 20% down payment and wants
But, as the building comes closer to occupancy or 80%, the builder may lift some financial restrictions. Our experts strongly recommend that you prepare a pre-approval before entering into a pre-construction contract.
What Is a Pre-Construction Condo?
A pre-construction condominium is a unit purchased before or during its construction stage.
An upside about a pre-constitution condo is that you can ensure your brand new home with a small deposit. It usually ranges between 3-10% of the total charge. Not to mention, the mortgage repayments are not included until the closing, which means you only start paying once you get settled in.
Know the Timing of the Cooling Period
From the day of signing, you have a 10 day cooling off period which in this time you can explore the purchase in more detail. We advise consulting with a Real Estate Lawyer on every purchase agreement to walk you over all the associated costs. And, whether buyers are not or are given the cooling period, the number of days will vary from which location they reside in. Some properties may not have a 10 day cooling off period so it is important to ask.
With this arrangement, you get more time to save up for a larger deposit and decrease the cost of your repayments once you begin paying.
Closing Costs
These are additional expenses that buyers will need to pay for between the time they make an offer and the day that they close the deal. These include the following:
- Development Levies
- Land Transfer Tax
- Legal Fees
- Enrollment Fees
- HST
What Are the Factors That Affect the Eligibility to Get a Mortgage?
Banks typically look at things such as Income and credit score. While income being one of the main factors to obtaining a mortgage approval, credit score has a play in it as well.
Credit Score
An excellent credit score becomes essential when planning to obtain a mortgage pre approval. While this is not the main factor while being assessed for a new mortgage, Paying your payments on time and keeping your debt ratio low can help you achieve excellent credit.
Income to Debt
Income to debt is a ratio of putting one’s debt service as a percentage compared to their income.
For instance, if you get a salary of $10,000 per month, and you have a $1000 school loan payment and $2000 as mortgage payments, you are at 30%. This means that 30% of your monthly income covers your debt repayments.
