Question:

Dear Sir

I am considering buying a new home (about 200,000)with a 5% downpayment and 95% financing. The developer is requesting 17,000 deposit within 3 months of signing the purchase agreement while the closing date is about 10 months away.

Just wondering, can the developer request more than the 5% downpayment as a deposit. What do you sugest in this scenario.

Answer:

The developer is within his/her rights to request as much deposit as he/she feels is necessary to secure the sale. Often, developers will increase the amount of deposit required to cover the cost of extras you requested on the property purchase. Usually this deposit is spread over two or three instalments during construction.
To qualify for 95% high ratio financing, you are required to have your 5% down payment as well as an additional 1.5% available for closing costs. In other words you need to have about $13,000 available for a $200,000 purchase price. If $17,000 is not available to you at present, you will have to borrow the difference and repay it when your mortgage company advances the full amount of the mortgage and your solicitor refunds you the difference on closing.

Answered By: John Lozinski

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