Deposit Structure for New Builds
Pre-construction purchases usually require a series of deposits paid directly to the builder over months or years before the home is complete, rather than a single down payment at closing. This spreads out your cash requirement but ties up funds for a long period before you actually get a mortgage.
When Financing Actually Kicks In
With resale homes, your mortgage is arranged and funded shortly after your offer is accepted. With new builds, your mortgage only comes into play near final closing, sometimes years after you signed the purchase agreement, which means market and rate conditions may look very different by then.
- Deposits paid over construction period
- Mortgage arranged near final closing
- Rates and rules may change before then
Interim Occupancy for Condos
Many new condos have an interim occupancy period where you move in and pay occupancy fees to the builder before your unit's final closing and registration. These fees are not the same as mortgage payments, and it is important to budget for both this period and the eventual mortgage.
Appraisal and Value Risk
Because years can pass between signing and closing, the appraised value at closing might differ from your purchase price, which can affect your mortgage approval. Staying in touch with your broker as your closing date approaches helps you catch any issues early.
Resale Financing Simplicity
Resale purchases are more straightforward since financing, appraisal, and closing typically happen within weeks of your accepted offer. If predictability matters most to you, resale removes much of the timeline uncertainty that comes with new construction.
Frequently asked questions
- Do I need mortgage pre-approval before buying pre-construction?
- It is wise to get a general sense of your borrowing capacity, though your actual mortgage approval will happen closer to final closing, sometimes years later.
- What happens if rates or my finances change before closing on a new build?
- You will need to qualify under the conditions at the time of final closing, so it helps to keep your financial situation stable and stay in contact with your broker throughout construction.
- Are new build deposits refundable?
- This depends entirely on your purchase agreement, so review the contract terms carefully or have a real estate lawyer review it before signing.