Quote:
Originally Posted by jaydorn
Alright so I've got a question about when you start paying a mortgage VS the possession date. Mainly with new construction in that you make an offer a condo that's under construction and it's accepted but it won't be complete for a 2-3 month period. Do you immediately start paying the mortgage to the bank once the offer has been accepted and papers signed, or would it be starting from the possession date?
|
When you buy a condo under construction, the lender cannot advance the mtg $ until the title can be transferred. In these instances, the buyer will pay "rent" to the builder for 2-3+ months, until the mtg can be registered. The rent can vary, depending on the fine print in the contract, but I think is normally at your normal mtg rate/mtg amount.
The Western Protocol does not apply to new condos:
http://www.lawsociety.ab.ca/files/co...ourse_2006.pdf
Sale of a condo unit by a developer (section 14(3) of the Condominium Property Act)
[Otherwise], The Protocol . . . allows the release of funds on the closing day without having to wait for confirmation of registration of the transfer and the mortgage.
When you take possession of a new condo, you agree to rent the condo for the mortgage interest until the builder can transfer title and your mortgage can be registered on the title. Here is the catch, your mortgage cannot be paid to the builder until it is registered on the legal title. The problem with this is that title is not even available until the building is 50% owner occupied. Becoming 50% owner occupied can take month/ even years in some cases, so while you are waiting for 50% of the home owners to move in so that everyone can obtain title, you are paying interest on the amount of money you owe to the builder each month. What this means is that your mortgage is not forwarded and each month that you are paying interest, nothing ever goes to your principle, so essentially you are renting your new condo. Now if you are taking advantage of an excellent rate hold, you should be aware that your mortgage does not close until it is registered on title and if this takes months and in some cases years, you may be subject to whatever rates are in place when your actual mortgage is registered.