Buying a pre-construction home involves navigating several unique stages before you can officially call it your own. Two significant milestones in this process are interim occupancy and final closing. Let’s explore the difference between these two stages, including what interim occupancy entails, associated fees, and how it differs from the final closing.
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Understanding Interim Occupancy
Interim occupancy is a transitional phase that occurs after the construction of the pre-construction home is complete but before the final closing. During this period, the homebuyer is granted temporary possession of the property while the builder finalizes any remaining construction work and obtains the necessary approvals and permits for the development. Amenities in the building are often still under construction and buyers usually will not have access to amenities or many parts of the building.
During the interim occupancy period, the homebuyer is required to pay interim occupancy fees. These fees are paid to the builder and cover a portion of the costs associated with the use of the property, such as property taxes, maintenance fees, and interest on the builder’s mortgage. Interim occupancy fees are typically calculated based on a predetermined formula, often a percentage of the purchase price.
What Interim Occupancy Entails
During the interim occupancy period, certain conditions apply:
a. No Mortgage Payments: Since the homebuyer does not have legal ownership during interim occupancy, they are not responsible for mortgage payments. Instead, they pay interim occupancy fees to the builder.
b. Utilities and Insurance: The homebuyer is typically responsible for paying utilities and obtaining insurance coverage during the interim occupancy period.
c. Tarion Warranty Coverage: Tarion warranties, which provide protection against defects and structural issues, typically begin during the interim occupancy period.
Final Closing
The final closing is the culmination of the pre-construction home purchase process. It is the point at which legal ownership of the property is transferred to the homebuyer, and the mortgage becomes active. At the final closing, all the necessary paperwork is completed, and the remaining balance of the purchase price, including adjustments, is paid to the builder.
a. Legal Ownership: During interim occupancy, the homebuyer does not have legal ownership of the property. However, at the final closing, ownership is transferred to the buyer.
Interim occupancy provides temporary possession while the builder completes construction and obtains necessary approvals. During this period, the homebuyer pays interim occupancy fees instead of mortgage payments. The final closing marks the legal ownership transfer and activation of the mortgage.
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