Real Estate

Mortgage timeline for a pre-construction condo purchase

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  • Feb 11th, 2020 10:23 am
Newbie
Nov 18, 2012
7 posts
2 upvotes
Toronto

Mortgage timeline for a pre-construction condo purchase

Hi everyone

I apologize in advance if these are dumb questions, but for some reason I can't find clear answers on Google.
I'm a first time home buyer, purchased a pre-construction condo in 2018, and the move in date is now approaching. I have a couple of questions about the timeline for getting the mortgage approved.

1. Assuming the move-in date is October 1st, 2020, and there's a few months of interim occupancy before the closing date, when am I supposed to find and get the mortgage approved? Before October 1st? Or during the interim occupancy?
2. Also, assuming I'll get everything done before October 1st, will that mean I have to go through the whole process again before closing? For how long will a mortgage approval be valid, so I won't have to go again a few months later with paystubs and paperwork and do it all over again?

Thanks! And, once again, I'm sorry if the questions have been asked before.
4 replies
Deal Addict
User avatar
Dec 21, 2013
2161 posts
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GTA
1. The developer/agent/lawyer will get in touch when the building is coming closer to final closing and they have a firm date. Usually you should have the ball rolling 8-10 weeks prior to the firm closing date. So assuming move-in date is Oct 1st, I would begin conversations with the banks late July.

2. No, you don't have to do it again. When you have the final closing date from the developer, the bank you choose to go with will during negotiations will enact the mortgage as of that day. Just make sure you have a good lawyer lined up for the closing and a bank person who is on the ball about these things as there is a lot of paperwork involved.

Typically one to five days before closing your condo, your Lawyer will provide you with a “Statement of Adjustments” which include property taxes and condominium fees. It will also outline how the funds will move through your Lawyer’s Trust account on the day of closing and how much money you will need to bring in when you meet with your Lawyer by way of Bank Draft or Certified Cheque made out to your “Lawyer’s in Trust”. This will be the total amount for the closing costs, one amount which covers everything such as all fees, title insurance, land transfer tax and the remainder of your down payment if required.
Newbie
Nov 18, 2012
7 posts
2 upvotes
Toronto
Thanks for the details!
georgecantstandya wrote: Usually you should have the ball rolling 8-10 weeks prior to the firm closing date. So assuming move-in date is Oct 1st, I would begin conversations with the banks late July.
My only confusion here is about the closing date. I was told there will be an interim occupancy period of a few months, after the move in date, so doesn't that mean the closing date will be sometime in early 2021? So if I should get the ball rolling 8-10 weeks prior to closing, doesn't that mean during interim occupancy (so after October 1st)?
georgecantstandya wrote: Typically one to five days before closing your condo, your Lawyer will provide you with a “Statement of Adjustments” which include property taxes and condominium fees. It will also outline how the funds will move through your Lawyer’s Trust account on the day of closing and how much money you will need to bring in when you meet with your Lawyer by way of Bank Draft or Certified Cheque made out to your “Lawyer’s in Trust”. This will be the total amount for the closing costs, one amount which covers everything such as all fees, title insurance, land transfer tax and the remainder of your down payment if required.
In my case, only 10% downpayment was required, but I will have the money for 20%. I assume this should be payed before (or at the same time) with the mortgage approval process, since it will change the mortgage amount and length (30 yrs vs 25)? Or can I just say I will pay 20%, and be charged on closing with all the other costs?

Thanks again!
Deal Addict
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Dec 21, 2013
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GTA
cristitane wrote: My only confusion here is about the closing date. I was told there will be an interim occupancy period of a few months, after the move in date, so doesn't that mean the closing date will be sometime in early 2021? So if I should get the ball rolling 8-10 weeks prior to closing, doesn't that mean during interim occupancy (so after October 1st)?
I gather this is your first pre-construction purchase. You should educate yourself on the difference between interim occupancy and final closing. https://www.tarion.com/news/286/interim ... -explained

You do not need to have the mortgage enacted until final closing. I'm unsure what your deposit structure is, but most condos today are 20% down in a similar structure:
5% upon signing
5% in 30 to 90 days
5% in 180 to 270 days
5% upon final closing.

Read your contract carefully.
cristitane wrote: In my case, only 10% downpayment was required, but I will have the money for 20%. I assume this should be payed before (or at the same time) with the mortgage approval process, since it will change the mortgage amount and length (30 yrs vs 25)? Or can I just say I will pay 20%, and be charged on closing with all the other costs?
When you meet with the bank and your lawyer, they [the bank] will go over all the particulars with you regarding how much money you want to put down vs. how much you want to borrow via a mortgage. Those final amounts (lets say you want to put down the equivalent of 20% and only mortgage the remaining 80%), will have to be coordinated with your RE lawyer who will gather all the bank drafts, final mortgage documents etc. and coordinate with the developer. This is why I said it's important to have a good lawyer and a good bank person who are well organized and on the ball.

Alternatively, if you want to only put down 10% to 20%, the bank will work out with you how much the CMHC mandatory insurance will be etc.
Deal Guru
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Feb 2, 2014
11231 posts
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Toronto
cristitane wrote: Thanks for the details!



My only confusion here is about the closing date. I was told there will be an interim occupancy period of a few months, after the move in date, so doesn't that mean the closing date will be sometime in early 2021? So if I should get the ball rolling 8-10 weeks prior to closing, doesn't that mean during interim occupancy (so after October 1st)?



In my case, only 10% downpayment was required, but I will have the money for 20%. I assume this should be payed before (or at the same time) with the mortgage approval process, since it will change the mortgage amount and length (30 yrs vs 25)? Or can I just say I will pay 20%, and be charged on closing with all the other costs?

Thanks again!
It's tough with new build condos, because you never know when they will close. They always say occupancy will be a few months, but I've seen a lot worse. It's not uncommon for a building to be in occupancy for 1-2 years!

You will likely close in 2021 if occupancy date is in October. I would follow up with the builder in December-January to see where they are at with condo registration and closing (about 2 months after occupancy). If they are certain they will close soon, then you can start getting a mortgage approval. If not, just wait until they give you confidence in the closing date.

A lot of the approvals I get for my clients buying a new build expire, because the closing date gets pushed back. As a result, we have to start the process from scratch at least one more time. Approvals at a competitive rate can only be held for 120 days.
Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative

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