We’ve all seen tough days, so we understand how worried you are right now. You are at a point where you could be losing the full deposit and letting go of the pre-construction deal. But before panic sets in, take a breath and remember that you still can take some measures to continue the payments.
What happens when you miss a deposit payment?
Most developers understand that delays happen and don’t immediately cancel contracts at the first missed payment. Often, they give you a short grace period to pay the overdue amount without any penalties. But if the delay stretches on, developers have the right to add late fees, interest, or even cancel the agreement if you miss multiple payments.
In Ontario, penalties vary by contract, so check your agreement to see what you’re facing. If multiple payments go unpaid or you fail to communicate with the developer, they may cancel your contract and resell the unit to someone else. This could possibly mean that you’ll lose the deposit.
What can you do if you miss a deposit payment?
Builders are willing to cooperate because they don’t want to get into the hassle of a new buyer but you need to communicate openly with them. Here’s what you can try:
1. Contact the Developer Early
As soon as you realize you may miss or have missed a payment, contact the developer. Explain your reasons, and they might offer an extension or temporary deferral, buying you time to get back on track.
2. Renegotiate Payment Terms
You may find it more manageable to make smaller deposit payments every month or 6 weeks, instead of bigger payments every 90 days. But you can only negotiate if you’re serious about maintaining the contract. If you fail to follow after renegotiations, the builder won’t offer an extension.
3. Talk to a Real Estate Lawyer
If the developer isn’t open to renegotiation and your contract feels at risk, a well-reputed real estate lawyer might help. They will explain your rights under Ontario law and even help you negotiate with the developer.
Long-term effects of missing deposit payments
Beyond the immediate risk of losing your unit, here’s how it’ll affect your future real estate transactions:
1. Mortgage Approval
If you are unable to close the property, it’ll go on your file and future lenders will be more cautious dealing with you. That’s why you need to talk to your developer, so they can give you extensions.
2. Potential Credit Issues
While a missed deposit payment won’t directly affect your credit score, the builder may file a court case and demand it be shown on your credit report. With so many buyers having to let go of their pre-construction purchases, we’re seeing this happen.
3. Loss of Future Equity
If you borrow money or open a line of credit to make payment, you won’t get to enjoy a bigger equity in future. However, that purely depends on how much amount you’re borrowing. Before taking out a loan, try to liquidate your assets or take a home equity line of credit on your current one, if any.
Stay organized and plan your payments in advance. For more helpful pre-construction tips, follow That Pre-Construction Guy.