# interim occupancy for new condo



## clovis8 (Dec 7, 2010)

I am hoping someone on the forum has dealt with an interim occupancy. I want to buy a new condo and I will get possession before I will get title because it is a brand new development and the builder cannot register title until it is "substantially complete". 

As I understand it what happens is I move in and pay a fee (which is the interest I would have paid on my mortgage) until title is transferred which could be several months. This payment does not go on my mortgage at all. It's basically like rent. 

My question is how does the mortgage work? Are my rates and qualification locked in at possession and the money is just held until title transfer several months later? Or, do I have to wait for title transfer to even get a mortgage?

I am really hoping someone here has dealt with this interim occupancy before as I am pretty confused.


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## joncnca (Jul 12, 2009)

the occupancy fee is based on the remaining unpaid portion of the purchase price (i.e. purchase price minus deposit), they'd declared it somewhere in the agreement of purchase and sale. it is not necessarily equal to interest on mortgage, as interest would depend on the size of your mortgage. 

in general, i would expect the occupancy fee to be higher than the interest, but lower or similar to your mortgage payment (principal and interest), although again, would depend on size of your mortgage. so figure out how much the occupancy fee is, it's in your documents. and yes, occupancy fee does not go towards mortgage (you don't have a mortgage yet), but also look in your documents for a breakdown of the fee. it MAY include estimated property taxes for the occupancy period. if it doesn't, be prepared to pay a lump sum in back taxes owing for the period of occupancy after the building gets registered.

registration and transfer of title depends on number of units in your development and your municipality. more units (i.e. highrise) will take longer to register. also, my experience with Toronto was that it took a really long time, several delays from the expected date of occupancy...for me it was something like 11 months...sucky, i know.

when you bought the place, you probably got a pre-approved mortgage. you would have had a cool down period after you signed the purchase documents, during which time you could find financing and have the option to cancel your purchase in the event you changed your mind or failed to find financing. anyway, this pre-approval (likely offered by a bank cooperating with the builder) would have indicated the how long your pre-approval was guaranteed for. if the bank was cooperating with the builder, it would have indicated a good long amount of time, long enough for the building to get registered. this pre-approval and its associated terms would still be in effect at the time of registration.

you can get a pre-approved mortgage any time before registration, just be aware of how long the pre-approval is in effect. usually banks will guarantee a pre-approval for 3 to 6 months. make sure the approval is still valid when your building gets registered. before registration, the builder (or your lawyer) should send you a letter a few weeks in advance reminding you to prepare financing if you haven't already done so. otherwise, ask the builder. 

you need to have all your financing already set up by the time the title transfer happens, as this indicates the beginning of your ownership of the property. in order for you to own a property, you must have paid for it, even if it is mortgaged.

one of the other crappy things about buying new is that as i said above, they MAY include property taxes into your occupancy fee. often times they estimate wrong, and unfortunately, they estimate low...so prepare some extra money for the additional taxes that need to be paid on closing. 

and if the occupancy fee doesn't include property tax, be aware that you'll probably get hit with it all at once after the building is registered. at my condo in downtown toronto, the occupancy fee did not include property tax. after the building was registered, and after another period while they calculated my property value/taxes owing, they hit me with about 2.5 years worth of omitted property taxes that needed to be paid immediately (and within a few months for the most recent year).


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## NotMe (Jan 10, 2011)

Thats' very interesting to know, thanks for sharing that joncnca

Makes me wonder why anyone would buy new nowadays.


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## joncnca (Jul 12, 2009)

well i bought the condo new because at the time the price was well discounted below similar resales nearby, so it was a decent buy at the time. also, while i vaguely knew about occupancy and property taxes at the time, it wasn't until i was in the middle of it did i start to get into the details of how everything was broken down, and what consequences might arise. luckily had a good habit of preparing for unexpected expenses, and managed through, but it was pretty irritating that no one really warned me about it...and it's also caused me to have a distrust of condo salespeople, whether they're intentional subversive or simply ignorant.

i never wanted to pay that occupancy fee again, but 2nd time around i bought a new condominium townhouse because my (now) wife really liked the place, we plan to stay there for a very long time, it's close to family, etc etc etc.....yah, i also looked into resale properties nearby at the time but they didn't really do it for us, so there are many considerations that may cause one to buy new. it may not always have to do with the money, but also consider that an older resale may require more repairs and other maintenance costs. nevertheless, as much as it's true in general of homeownership, you really need to stay at the new construction/keep ownership of it for a good long time to make it break even.

occupancy fees...heartbreaking


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## clovis8 (Dec 7, 2010)

I am not sure why everyone finds occupancy fees so objectionable. I don't see how it's different than rent which I pay now so really the question is just am I willing to pay a few extra months rent? The objection seems to come from the idea it's your place you are renting which seems more psychological than economic in nature.


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