Assignment buyers usually pay the assignor’s deposit refund plus profit in cash when the assignment is signed, then get a mortgage on final closing to pay the builder’s balance. Lenders generally lend on the lower of the price and the appraised value at closing, so if the appraisal comes in low, the buyer covers the gap.
Key takeaways
- Have the upfront cash ready: the deposit refund plus the assignor’s profit.
- Get a mortgage pre-approval that accounts for the assignment, and qualify under the stress test.
- Appraisal risk sits with the buyer if values fall before closing.
- Budget for closing costs: land transfer tax, development charges and other adjustments set by the builder.
How much cash do I need to buy an assignment?
At signing, you typically reimburse the deposits the assignor paid the builder (often 10% to 20% of the original price) plus the assignor’s profit. Using the example of a $648,000 original price with $129,600 in deposits and a $71,900 profit, that’s $201,500 up front, before your own legal fees and any tax payable on the assignment.
How does the mortgage work on an assignment?
Your mortgage funds on final closing, when you pay the builder the balance of the original price. Lenders assess the property’s value at that time. If they lend on the lower of the total price you paid and the appraised value, a low appraisal means more cash from you. Talk to a mortgage broker who has handled assignments, and tell them it’s an assignment from the start.
Do I have to pass the mortgage stress test?
Yes. You’ll need to qualify under current federal mortgage rules when you apply. Because closings can be years away, rates and your finances can change, so keep your pre-approval current as closing approaches.
What closing costs come with an assignment?
- Land transfer tax: in Ontario it’s generally calculated on the total value of what you pay, which can include the amount paid to the assignor. Toronto has a municipal land transfer tax too.
- Builder adjustments: development charges, utility connections and other items set out in the original agreement, which are often capped.
- Interim occupancy fees if you move in before final closing on a condo.
- Legal fees and title insurance.
How can buyers reduce financing risk?
- Make your assignment offer conditional on financing and builder consent.
- Review the original agreement for delayed-closing clauses and adjustment caps.
- Keep a cash buffer for an appraisal shortfall.
- Compare with resale options: assignment vs. resale.
Frequently asked questions
Can I use a mortgage to pay the assignment deposit?
Not usually. The deposit refund and profit are paid in cash at signing; the mortgage funds on final closing.
What if the condo appraises for less than I paid?
The lender may lend on the lower value, and you’d need to cover the difference in cash.
Is land transfer tax higher on an assignment?
In Ontario it’s generally based on the total consideration, which can include the amount paid to the assignor, so it can be higher than tax on the original price alone.
Buying or selling an assignment?
Browse live assignments or post yours for free on Assignment Connect.
Sources
This guide is general information, not legal, tax or financial advice. Rules change and every agreement is different, so speak with a real estate lawyer, accountant or mortgage professional about your situation.