Buying a New Build Home in Durham Region: How a Real Estate Lawyer Can Help

The short answer: Buying a new build in Ontario often means signing a lengthy contract and waiting months or years to close. If your lender won't fund your mortgage at closing, a real estate lawyer can negotiate with the builder, including asking for a closing extension, which comes with a fee.

When you buy a home or condo that isn't built yet, or is still in the planning phase of development, a lot can change between the day you sign and the day you close. Interest rates move, lender rules change, and the stress test that buyers must pass with their lender can make it harder to qualify than it was when you were first approved. At McMurter & Associates, we've seen buyers struggling to get their mortgage funded on new builds because of exactly these changes.

Can a real estate lawyer help with the purchase of a new build?

Yes. Although it's not a legal requirement, many people consult a real estate lawyer to review the lengthy and complex contract they'll need to sign when they buy a new build, whether it's a home or a condo. Learn more about our new home purchase and condominium services.

What if you were pre-approved, but your lender won't approve you today?

You've been patiently waiting for your new home to be finished so you can move in. Unfortunately, the economy isn't the same as when you first bought. You may have been approved for your mortgage one or two years ago, but now your lender isn't agreeing to fund your mortgage.

Does a mortgage pre-approval guarantee a mortgage?

No. A pre-approval is the first step when buying a new build, but it doesn't guarantee that your lender will provide the funds at closing. Your financial situation can change between your pre-approval and closing, and your lender's stress test can change, making it more difficult to be approved.

What can you do if your lender won't fund your mortgage?

You do have options. Working with a trusted team of real estate professionals makes all the difference if your deal goes awry. In general:

1. Contact your real estate lawyer right away. Your lawyer can negotiate with the builder on your behalf at any time throughout the process.
2. Talk to another lender. You may need time to consult with a different lender.
3. Find a way to make up the shortfall. That's the gap between your approved mortgage amount and what you can now be approved for.
4. Ask your builder for an extension. This can buy you time to do steps 2 and 3.

Can you ask a builder for an extension?

Yes. An extension from your builder will come with a fee. Often, though, that fee is less than the amount of money you'd lose if you walked away from the deal.

In other, less favourable circumstances, the builder will refuse an extension.

What happens if you walk away from a new build?

If the builder refuses an extension and you have to walk away from your deal, there can be other consequences, such as legal action from the builder. That's why it's so important to get legal advice early, before a problem becomes a deadline.

How can you reduce the risk of a financing problem?

1. Have your lawyer review the contract before you sign.
2. Remember that a pre-approval is just the first step. It isn't a guarantee.
3. Stay in touch with your lender or mortgage broker as your closing date approaches, so surprises come early.
4. Avoid major changes to your finances between approval and closing.
5. Act quickly if something changes. Extensions and other options are easier to negotiate before a deadline.

Contact

Brian McMurter is a real estate and estate planning lawyer at McMurter & Associates in Whitby, helping Durham Region, Ontario residents with estate planning and real estate law. 

Contact McMurter & Associates Monday to Friday, 9 a.m. to 5 p.m. at info@mcmurter.com or call 1 800 756 7138 or 905 666 9200 to schedule a consultation.

Disclaimer: This article provides general information about Ontario law and is not a substitute for legal advice. Please speak with a lawyer about your specific circumstances before making decisions about real estate law and estate planning.