Deposits & financing
How much money do I actually need to buy pre-construction?
Budget the deposit, commonly 10% to 20% over the first year or two, plus closing costs of roughly 2% to 4% of the price for land transfer tax, levies, adjustments and legal fees. On a $1.1 million freehold home, that is often $110,000 in deposits and a further $30,000 to $45,000 at closing.
There are two separate piles of money, separated by several years, and people routinely budget only the first.
Pile one: the deposit
Commonly 10% of the price on freehold, sometimes 15% or 20%, paid in instalments over 12 to 24 months. On a $1,100,000 home at 10%, that is $110,000, with the first $25,000 to $50,000 due as a bank draft on signing. Typical schedules.
Pile two: closing
Due years later, in certified funds, on top of your mortgage:
| Item | On a $1.1M freehold home |
|---|---|
| Ontario land transfer tax | ~$18,475 |
| Toronto municipal LTT (city only) | ~$18,475 more |
| Development charges / levies | $5,000 – $20,000+, uncapped unless negotiated |
| Utility connections, meters, Tarion enrolment | $2,000 – $5,000 |
| Legal fees and disbursements | $2,500 – $4,000 |
| Grading / sodding deposits | $1,000 – $3,000 |
Outside Toronto, a realistic all-in closing figure on this home is roughly $30,000 to $45,000. In Toronto, add the municipal land transfer tax. First-time buyers can claim up to $4,000 provincially and up to $4,475 in Toronto. More.
The two items that can blow the budget
An uncapped levy clause. Development charges rising between signing and a closing four years out, passed through with no ceiling. Get a cap. More.
A failed HST rebate. If your price was quoted net of HST rebate and you turn out not to qualify, because you are renting it out, or the spousal test catches you, the builder bills the rebate amount at closing. On this home that is up to $80,000, due on the day.
And the one nobody budgets
An appraisal shortfall. If the home appraises below your price, the gap is cash. Why this happens.
A working rule
For a $1.1M freehold home outside Toronto, plan on roughly $110,000 in deposits and $35,000 to $45,000 at closing, around $150,000 total, excluding any rebate or appraisal surprise. Hold a reserve beyond that.
If that number is uncomfortable, the answer is a less expensive home, not a tighter budget. The people who get hurt here are the ones with no margin. Let’s build the actual number for your purchase.
Sources