How Presale Mortgages Work

A presale (or pre-construction) property is a home or condo that you purchase before it's built. You're essentially buying the promise of a future property based on floor plans, renderings, and specifications.

Unlike resale properties where you get a mortgage immediately, with presales you only pay deposits until the building is complete, which could be 2-5 years in the future.

When you purchase a presale, you don't pay the full amount upfront. Instead, you pay deposits at specific intervals:

• Initial deposit on signing (typically 5-10%)
• Additional deposits at set intervals (e.g., 5% at 6 months, 5% at 12 months)
• Total deposits usually range from 15-25% of the purchase price

These deposits are held in trust and typically earn interest until completion. The remaining balance is paid at completion through your mortgage.

You don't apply for a mortgage until close to the completion date (typically 30-90 days before). This is a crucial difference from resale properties:

• You must qualify based on your financial situation at completion time
• Interest rates at completion will determine your mortgage payments
• Mortgage rules and stress tests may have changed since you purchased

This is why planning ahead is so important - your financial situation and the mortgage landscape could be very different by completion time.

The biggest risk with presale purchases is not qualifying for a mortgage at completion:

• Interest rates might be higher, reducing your qualification amount
• Your income or employment situation might change
• You might take on other debts that affect your qualification
• Mortgage rules and stress tests could become stricter

If you can't qualify for a mortgage at completion, you might lose your deposits or face legal action. This is why it's critical to plan conservatively and maintain financial discipline during the waiting period.