Condo Buying Tips

Denny’s Tips and Facts for Condo Purchasers

The Occupancy date and the final closing date… what’s the difference?

Many clients purchasing condos get confused when trying to differentiate between their occupancy date and registration date…knowing that they are not the same thing and that one will have an impact on the timing of your mortgage.

Occupancy Date

At the time of occupancy, you are allowed to move into or occupy the property. However, you are paying occupancy fees to the builder which are outlined in the Agreement of Purchase and Sale. This includes maintenance fee monthly property tax and since you do not have a mortgage yet…instead, you will pay the builder an interest only loan at a 1 year fixed rate until the closing date. You are NOT paying your mortgage at this point—this will happen approximately 6 months later, upon final closing date.

Final Closing Date or “Registration Date”

This occurs upon registration of the building. You, the purchaser, legally owns the property and has possession of your condo. Your mortgage term begins, you start making mortgage payments and paying down your mortgage. This is when the occupancy fee stops.

Are there any government incentives for first time condo buyers?

Yes! I’m glad you asked. The incentives offered by the government are RRSP Home Buyers Plans and Ontario Land Transfer Tax rebate of up to $2000 (see section on Land Transfer Tax).

Is there GST on purchasing a new condo?

If you are purchasing a unit to move into, then the GST is included in the purchase price. That also includes any of your family members that might move in if you decide not to move in yourself. If you are an investor and plan to rent the unit, then you must pay GST on top of the purchase price. You can get the GST you paid rebated by Revenue Canada. All you have to do is fill out forms and send your GST number to them. Please contact your accountant or lawyer in this regard.

What does the RRSP Home Buyers Plan entail?

Under the Homebuyers’ Plan, first time home buyers can withdraw up to $20,000 from their RRSPs tax free to use towards the purchase of a home.

The qualification conditions are:

  • You must be a Canadian resident
  • You are a first time home buyer which means that you did not live in a home owned by you or your spouse in the last five years
  • You have to intend to occupy the qualifying home as your principal place of residence no later than one year after buying or building it
  • If the home that you own is bought o more than 30 days before the date of your RRSP withdrawal

If you or your spouse qualify under the Plan, each person can withdraw up to $20,000 from your RRSPs for a combined total of $40,000, which can be made as a single withdrawal or a series of withdrawals through the same calendar year.

Money withdrawn under this federal program must be paid back to your RRSP within 15 years. Count on paying at least 1/15th of the amount back every year to avoid triggering any extra taxes and make sure you include the pay-back amount in your calculations when planning your budget! To apply for the HBP, download the HBP application form and complete Area 1 of Form T1036. Give it to your RRSP issuer (your financial institution) who will complete Area 2. They will issue you a T4RSP slip showing the amount withdrawn for your income tax return.

Can I get out of a deal after purchasing my condo?

With the purchase of a newly built condo, you may cancel the agreement of purchase and sale within 10 days of receiving a signed document by the builder. All deposit cheques will be returned at the time of cancellation. During the first 10 days after your purchase, you can bring your documents to your lawyer and they will look over and explain important facts and closing costs. If there are any changes to offer then your lawyer can fax the builder’s lawyer any requests. If accepted you can then go to the sales office to sign the amendment to make changes to your agreement.

What you need to know about getting a mortgage!

Even though your new condo is closing in 3-4 years, you will still need to get mortgage approval from your bank. It states that you have the financial ability to buy this property as of (time of purchase). We like to get this letter from a bank within 30 days of the purchase. Below is a chart to help you calculate the mortgage payment at different rates.

$Mortgage amount (to the 1000th) x $— (the rate)

= how much you pay monthly on your mortgage

Example: You need a mortgage of $240,000.00 I recommend a 25 year amortization… pay it off quicker!

Let’s use 3%, which is the going rate with a 5 year closed mortgage.

The factor is 4.73%.

So we multiply 240 (always take away three 0’s, so $240,000 becomes 240) by 4.73% which equals $1135.40

(240 x 4.73= 1135.20)

Therefore a mortgage of $240,000 will cost you $1135.20 per month, which includes both principle and interest!