How is "phantom rent" calculated?

[JayBee]

I heard it's usually on the higher end but am curious to see how it's calculated.

 

[carturo15]

I heard it's usually on the higher end but am curious to see how it's calculated.

To give you an example:

Purchase price :$200.000
Deposit paid to the builder :20% / $40.000
Remaining balance due to the builder : $160.000
You have to pay interest to the builder for this remaining balance. They normally take the 1 year Mortgage interest rate posted from Bank of Canada, which is 3.75% now.
$160.000x3.75%=$6.000/12=$500 monthly.
On top of that you have to pay the condo fees, let's say $200 monthly and also property taxes, calculated based on your purchase price and the property tax rate, let's say 200.000x0.08=$1600 a year - $133.33 monthly

The ocupancy fee will be $500+$200+$133.33=$833.33 monthly until final closing. depending on the building you also need to pay hydro separately.

 

[JayBee]

To give you an example:

Purchase price :$200.000
Deposit paid to the builder :20% / $40.000
Remaining balance due to the builder : $160.000
You have to pay interest to the builder for this remaining balance. They normally take the 1 year Mortgage interest rate posted from Bank of Canada, which is 3.75% now.
$160.000x3.75%=$6.000/12=$500 monthly.
On top of that you have to pay the condo fees, let's say $200 monthly and also property taxes, calculated based on your purchase price and the property tax rate, let's say 200.000x0.08=$1600 a year - $133.33 monthly

The ocupancy fee will be $500+$200+$133.33=$833.33 monthly until final closing. depending on the building you also need to pay hydro separately.

Thanks for the breakdown!

 

[tissot]

So how many months do these phantom rents usually last?

 

[AKS]

So how many months do these phantom rents usually last?

2-12 months or more depending when your builder closes.

 

[carturo15]

So how many months do these phantom rents usually last?

It depends on many factors, the builder, the city, I have seen different cases, sometimes 1 year, 6 months, 3 months. that's why is not a good idea to buy on lower floors in highrise towers. they are the first ones in taking occupancy and paying this rent.

 

[cdr108]

It depends on many factors, the builder, the city, I have seen different cases, sometimes 1 year, 6 months, 3 months. that's why is not a good idea to buy on lower floors in highrise towers. they are the first ones in taking occupancy and paying this rent.

hmmm ... i wonder how long the city workers strike would contribute to delays for registration?

 

[Imti]

To give you an example:

Purchase price :$200.000
Deposit paid to the builder :20% / $40.000
Remaining balance due to the builder : $160.000
You have to pay interest to the builder for this remaining balance. They normally take the 1 year Mortgage interest rate posted from Bank of Canada, which is 3.75% now.
$160.000x3.75%=$6.000/12=$500 monthly.
On top of that you have to pay the condo fees, let's say $200 monthly and also property taxes, calculated based on your purchase price and the property tax rate, let's say 200.000x0.08=$1600 a year - $133.33 monthly

The ocupancy fee will be $500+$200+$133.33=$833.33 monthly until final closing. depending on the building you also need to pay hydro separately.

Thanks alot for the breakdown. This is anxiety provoking. I bought new homes before but this is my first condo purchase. I purchased a unit in X condos (Great Gulf Homes) on a lower level. I hope GGH won't take that long too register and there won't be a huge time between occupancy and closing. Does anyone have experience with GGH in terms of how soon they register after occupancy?
In terms of purchasing a unit on a higher level....I did not have many options as most of the units (neutra) were sold out on higher levels.

 

[dpylyp]

Phantom Mortgage

None of the previous posts addressed the estimated property taxes during occupancy portion.

These are pure guestimates at the time of closing and the lawyers holdback at each opportunity to avoid any potential shortfall.

Once a tax bill is issued it will be retro to the date of occupancy and then everything balances out. Occupancy date is the Builder paying on your behalf. Post registration of the building is the condo owners portion.

 

[simuls]

Sure they did

On top of that you have to pay the condo fees, let's say $200 monthly and also property taxes, calculated based on your purchase price and the property tax rate, let's say 200.000x0.08=$1600 a year - $133.33 monthly

The ocupancy fee will be $500+$200+$133.33=$833.33 monthly until final closing. depending on the building you also need to pay hydro separately.

 

[Xenosblitz]

If the calculations above are correct, how is it that people complain about occupancy fees? The only downside I see is if you want to pay all cash for the transaction, or if you believe the interest rate will head upwards before you close. Correct me if I am wrong, but each of the above can be mitigated to some degree if you ask the builder if you can pay them the entire amount on occupancy and if you lock in your rate with a bank.

All other fees I see would have to be paid regardless if you owned the unit or paid phantom rent.

 

[harsh]

If the calculations above are correct, how is it that people complain about occupancy fees? The only downside I see is if you want to pay all cash for the transaction, or if you believe the interest rate will head upwards before you close. Correct me if I am wrong, but each of the above can be mitigated to some degree if you ask the builder if you can pay them the entire amount on occupancy and if you lock in your rate with a bank.

All other fees I see would have to be paid regardless if you owned the unit or paid phantom rent.

Its because the $833 could be stretched to 12 months = thats $9996 you could have paid towards your principal that goes into the builders pockets. You are pretty much up to the mercy of the builder. If they gave you an option to move in once registered then it would be fair. Plus how many ppl have enough to pay lump sum to avoid phantom rent???

 

[Eug]

goes into the builders pockets.

Not really. The builders want to close asap as well. They don't really profit by charging phantom rent.

 

[cdr108]

If the calculations above are correct, how is it that people complain about occupancy fees? The only downside I see is if you want to pay all cash for the transaction, or if you believe the interest rate will head upwards before you close. Correct me if I am wrong, but each of the above can be mitigated to some degree if you ask the builder if you can pay them the entire amount on occupancy and if you lock in your rate with a bank.

All other fees I see would have to be paid regardless if you owned the unit or paid phantom rent.

one pays for maintenance fees which are supposed to cover amenities, which usually are not completed yet.

as another poster stated, you could be paying 'phantom rent' indefinitely until the building is registered.

 

[AKS]

If the calculations above are correct, how is it that people complain about occupancy fees? The only downside I see is if you want to pay all cash for the transaction, or if you believe the interest rate will head upwards before you close. Correct me if I am wrong, but each of the above can be mitigated to some degree if you ask the builder if you can pay them the entire amount on occupancy and if you lock in your rate with a bank.

All other fees I see would have to be paid regardless if you owned the unit or paid phantom rent.

I don't think the calculations are really correct. The interest is not based on 1 year interest rate since you might not be borrowing for a year. Since closing can happen between 2-12 months, it's a short term loan. It's more like you pay the "line of credit" or short term interest rate. I think when I had occupany back less than 2 years ago, I had to pay around 6-7%. I don't think the 1 year rate was that high then.