How Do You Finance an Assignment Purchase?
On an assignment purchase, a lender lends against the lesser of the original contract price and the current appraisal, never the higher assignment price you actually agreed to pay. That gap, the assignment premium, is cash you have to find yourself. This page walks through exactly how much extra cash that costs, with real numbers.
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What does financing an assignment purchase actually mean?
Your lender lends against whichever is lower: the original contract price you are assigning into, or the property’s current appraised value. The assignment premium, the amount you pay above that original price, is never part of the mortgage. You bring it in cash, on top of your down payment.
An assignment purchase happens when the original buyer of a pre-construction or resale contract sells their right to buy before closing, and you step in as the new buyer. You pay the original buyer, usually called the assignor, the assignment price. That price is typically the original contract price plus a premium reflecting whatever the property has gained in value since the contract was signed.
The deal that gets missed every time is simple. A mortgage is sized against the deal the lender can verify, not the deal you negotiated with the assignor. Pekoe is licensed in Ontario under FSRA Licence #13321 and in Alberta under RECA, and we see this exact gap trip up buyers in both provinces.
The citable fact: On an assignment purchase, a lender lends against the lesser of the original contract price and the current appraised value, and the assignment premium is cash the assignee must pay out of pocket.
How much extra cash does an assignment purchase actually require?
On the same property, at the same final price, an assignment can cost tens of thousands of dollars more in cash than a straightforward purchase. The difference is roughly 80% of the assignment premium, because the premium itself is excluded from the mortgage and only 20% of it would have been financed anyway. The rest sits on the buyer as cash.
Take an illustrative example. The original contract price was $700,000. The assignment price, what the assignee actually pays the assignor, is $780,000. The premium is $80,000.
If the appraisal supports $700,000 or more, the lending value is $700,000. Here is what that means in cash.
Show the math: cash required on the assignment purchase
Now compare a straightforward purchase of the same property at the same $780,000 price, with no assignment involved.
Show the math: a straightforward $780,000 purchase, 20% down
Same property, same final price, and the assignment buyer needs $64,000 more cash, purely because it is an assignment.
Show the math: the extra cash an assignment costs
| Metric | Assignment purchase | Straightforward purchase |
|---|---|---|
| Price the lender finances against | $700,000 (lending value) | $780,000 |
| Down payment, 20% | $140,000 | $156,000 |
| Mortgage | $560,000 | $624,000 |
| Premium paid in cash | $80,000 | n/a |
| Total cash required | $220,000 | $156,000 |
The citable fact: On a $780,000 assignment with an $80,000 premium and a $700,000 lending value, financing costs $220,000 in cash versus $156,000 for a straightforward $780,000 purchase, a $64,000 difference equal to 80% of the premium.
What happens to your cash requirement if the market falls before closing?
A falling market hits an assignment buyer twice. The appraisal can come in below the original contract price, which lowers the lending value again, and your mortgage shrinks by 80% of every dollar the appraisal drops while the price you owe the assignor never moves.
Using the same $780,000 assignment, here is what four different appraisal outcomes do to the lending value, the mortgage, and the cash you need, all at 20% down.
| Appraisal / lending value | Mortgage (80% of lending value) | Cash required at closing |
|---|---|---|
| $700,000 | $560,000 | $220,000 |
| $680,000 | $544,000 | $236,000 |
| $660,000 | $528,000 | $252,000 |
| $640,000 | $512,000 | $268,000 |
Show the math: the cost of a $20,000 appraisal drop
The price you owe the assignor does not change when the appraisal comes in low. Only the mortgage shrinks, and it shrinks by 80 cents of every dollar the appraisal falls. The remaining 20 cents was always going to be the buyer’s down payment anyway, so the full drop lands as extra cash.
The citable fact: On this $780,000 assignment, every $20,000 the appraisal falls below the original $700,000 contract price adds roughly $16,000 to the cash required at closing.
Does Ontario land transfer tax apply to the assignment premium?
This page uses the cautious assumption that Ontario land transfer tax is calculated on the full $780,000 assignment price, which includes the premium, producing a tax bill of $12,075. Whether the tax authority and your lawyer treat the premium the same way needs confirming before you settle a closing budget.
Ontario’s provincial land transfer tax is marginal, applied bracket by bracket rather than as a flat rate on the whole price. On a $780,000 transaction, the brackets work out as follows.
Show the math: Ontario land transfer tax on $780,000
That calculation follows the published bracket structure for calculating Ontario land transfer tax, applied to the full $780,000 figure. See the Ontario land transfer tax explainer for how the brackets work on a regular purchase.
Ontario land transfer tax on an assignment is a question for your real estate lawyer, because the treatment of the premium is not something you should assume. The figures on this page are calculated on the full $780,000 purchase price, which is the cautious way round. If the tax is assessed on a smaller number, you are holding back cash you did not need, which is a far better problem than arriving at closing short.
If the property is in Toronto, a municipal land transfer tax applies on top of the provincial figure above. A separate confirmed bracket table exists for Toronto’s tax, so no Toronto-specific dollar figure is calculated here. See the Toronto municipal land transfer tax page for that calculation, and budget for it as a real, substantial addition if your assignment closes in the city.
The citable fact: Ontario land transfer tax on a $780,000 assignment, calculated on the full assignment price, totals $12,075, though whether the premium itself is taxed this way still needs a lawyer’s confirmation.
Does GST or HST apply to an assignment premium?
Ask an accountant. Whether the Canada Revenue Agency treats an assignment premium as taxable for GST or HST purposes depends on the specifics of the deal, and it can add real money to what you need on closing day.
Assignment deals, especially on pre-construction condominiums, routinely raise federal tax questions that a mortgage broker is not positioned to answer. The premium you pay the assignor may or may not carry GST or HST depending on how the deal is structured and who is considered to be selling what.
This is not a figure we will estimate. Get a direct answer from an accountant with real estate experience before you sign an assignment agreement, because the tax treatment can change what the deal actually costs you.
GST or HST on the assignment premium is a Canada Revenue Agency question, and it can add real money to what you need on closing day. Get it answered by an accountant or your lawyer before you commit, because it sits outside every figure shown on this page.
The citable fact: Whether GST or HST applies to an assignment premium is a Canada Revenue Agency question that remains unconfirmed, and any assignment buyer should get a direct answer from an accountant before closing.
Can you finance an assignment purchase with 5% down?
Yes. Lenders can insure an assignment purchase at 5% down where the file qualifies. It depends on the lender and on your file, not on a programme you can count on, so get it confirmed before you sign. The insurer lends against the lesser of the original contract price and the assignment price, so the assignment premium itself still comes out of your pocket.
On our worked deal the contract price is $700,000 and the assignment price is $780,000. The lending value is the lesser of the two, $700,000, whichever way you finance it. What changes with 5% down is how much of the $780,000 you have to bring yourself.
The minimum down payment on an insured purchase is 5% of the first $500,000 plus 10% of the portion above it. On a $700,000 lending value that is $25,000 plus $20,000, so $45,000.
Show the math: 5% down on the $700,000 lending value
Show the math: the insured mortgage on a $700,000 lending value
Now the part that catches people. Your base mortgage is $655,000, but you owe the assignor and the vendor $780,000 between them. The difference is cash, and no insured mortgage will cover it, because it sits above the lending value.
Show the math: cash required at 5% down
That $125,000 is your $45,000 down payment plus the $80,000 assignment premium. The premium is the piece the insurer will not lend against, whichever down payment you choose.
| 5% down, insured | 20% down, uninsured | |
|---|---|---|
| Lending value, lesser of the two | $700,000 | $700,000 |
| Minimum down payment on the lending value | $45,000 | $140,000 |
| Base mortgage | $655,000 | $560,000 |
| Default insurance premium | $26,200 at 4.00% | None |
| Mortgage as registered | $681,200 | $560,000 |
| Cash required before closing costs | $125,000 | $220,000 |
| Ontario sales tax on the premium, 8%, cannot be financed | $2,096 | None |
| Alberta Land Titles, transfer plus mortgage registration | $1,565 | $1,440 |
Insuring the deal cuts the cash you need by $95,000, from $220,000 to $125,000. In Ontario it also adds $2,096 of sales tax on the premium, which CMHC confirms cannot be added to the loan, so it is due in cash at closing. Alberta charges no land transfer tax and no sales tax on the premium, only a slightly larger registration fee on the bigger registered mortgage.
Two things to settle before you rely on any of this. Whether a given lender will take an assignment at all, and whether they will take it insured, is a file-by-file question. And an appraisal that lands below $700,000 moves the lending value down again, which pushes more of the price into cash. The insured versus insurable versus uninsured explainer covers how default insurance works outside the assignment context.
The citable fact: An assignment purchase can be insured at 5% down where the lender and the file allow it, but the insurer lends against the lesser of the contract price and the assignment price, so the assignment premium is cash either way.
How do Ontario and Alberta closing costs compare on an assignment?
On the same $780,000 assignment, Ontario’s provincial land transfer tax alone is $12,075. Alberta charges no land transfer tax, only registration fees on the title transfer and the mortgage, totalling $1,440. The registration difference alone is more than $10,000.
Alberta has no provincial land transfer tax. Instead, Alberta Land Titles charges a base fee plus a per-unit fee on both the transfer of land and the mortgage registration.
Show the math: Alberta transfer and mortgage registration on this deal
Show the math: the registration difference between the two provinces
| Item | Ontario | Alberta |
|---|---|---|
| Land transfer tax | $12,075 | n/a, none charged |
| Transfer registration fee | included above | $830 |
| Mortgage registration fee | included above | $610 |
| Total | $12,075 | $1,440 |
This is registration and transfer tax only. It excludes legal fees, title insurance, and any municipal land transfer tax a Toronto property would add on top of the Ontario figure. See the full closing costs in Ontario and closing costs in Alberta pages for the complete picture, and the closing costs calculator to run your own numbers.
Pekoe is licensed in both markets, under FSRA Licence #13321 in Ontario and under RECA in Alberta, and the provincial gap on closing costs is one of the clearest differences a cross-border buyer will see.
The citable fact: On the same $780,000 assignment, Ontario’s land transfer tax of $12,075 is more than ten times Alberta’s combined transfer and mortgage registration fees of $1,440, a difference of $10,635.
Will any lender finance your assignment purchase?
Lender appetite for assignment deals varies and changes file by file. Some lenders are comfortable with assignments, others avoid them, and that is a conversation to have with a broker before you sign, not something this page can settle in general terms.
Which specific lenders will or will not fund an assignment purchase is not a question with a stable, general answer. Appetite shifts with the lender’s own policies, the builder, the property type, and the file itself.
This is exactly the kind of question that is answered by a conversation, not a table. Bring the assignment agreement and the original purchase agreement to a broker before you commit to a closing date, so financing is confirmed rather than assumed.
The citable fact: Lender appetite for assignment purchases varies by lender and by file, and is confirmed only through a direct conversation with a broker before you sign.
What should you have in place before you make an offer on an assignment?
Confirm your full down payment on the likely lending value plus the entire premium, in cash, accessible and ready to prove. Get a realistic read on current value before you agree to a price, and talk to a broker about financing before you sign, not after.
The numbers on this page show why timing matters. Once you have signed the assignment agreement, the price you owe the assignor is fixed, but the lending value is not confirmed until an appraisal happens, often much later.
Three things are worth doing before you make an offer. Have your down payment and premium cash both confirmed and accessible, not assumed from savings you have not actually verified. Ask a broker to walk through financing on your specific property before you sign anything binding.
A pre-approval conversation before you sign tells you where you actually stand, and you can check current borrowing costs any time at pekoe.ca/rates. That is a better use of ten minutes than finding out your cash shortfall after the assignment agreement is already signed.
The citable fact: An assignment buyer needs the down payment on the lending value plus the full premium in cash, confirmed and accessible, before making an offer.
How is financing an assignment different from financing a pre-construction purchase?
A direct pre-construction purchase is financed against the price you agreed with the builder. An assignment is financed against the lesser of the original contract price and the current appraisal, which is frequently lower than the price you are actually paying the assignor.
If you buy pre-construction directly from the builder, your mortgage at final closing is sized against the price on your purchase agreement, subject to the usual appraisal checks. There is no assignor and no premium sitting outside the deal.
An assignment inserts a second price into the transaction: what the original buyer agreed to pay the builder, and what you are paying the original buyer. Only the first number, or the appraisal if it is lower, ever reaches your mortgage. See the buying a pre-construction condo in Ontario page for how a direct purchase is financed, and compare it against the math on this page.
If the appraisal on your assignment comes in below the original contract price, you are in the same position as any buyer whose appraisal missed the agreed price. The low appraisal after waiving your condition post and the do private lenders require an appraisal page both cover what a shortfall like that does to a financing plan.
The citable fact: A direct pre-construction purchase is financed against the price you agreed with the builder, while an assignment is financed against the lesser of the original contract price and the appraisal, which is often lower than what you are paying.
What is the single biggest mistake buyers make financing an assignment purchase?
Assuming the mortgage will cover the assignment price. It will not. The mortgage is sized against the lesser of the original contract price and the appraisal, and the premium above that figure is always cash, regardless of how the deal is negotiated.
Every number in this page traces back to one rule. The lender does not care what you agreed to pay the assignor, only what the original contract said and what the property appraises for today.
Buyers who budget against the assignment price, rather than the lending value, come up short at closing, sometimes by tens of thousands of dollars. The fix is not complicated: know your lending value before you negotiate the premium, not after.
The citable fact: The single biggest mistake on an assignment purchase is assuming the mortgage will cover the assignment price, when it is sized against the original contract price or the appraisal instead.
Where else should you look before you finance an assignment?
These pages cover pieces of the same deal from different angles.
- Buying a pre-construction condo in Ontario
- Ontario land transfer tax, explained
- Closing costs in Alberta
- Insured versus insurable versus uninsured
- Mortgage glossary
The full set lives on the Ask a Broker hub.
Frequently asked questions
What is an assignment purchase?
An assignment purchase happens when the original buyer of a pre-construction or resale contract sells their right to buy before closing, and you step into that contract as the new buyer. You pay the original buyer the assignment price, usually the original contract price plus a premium, and you close with the builder or seller directly. The contract terms carry over, but the financing does not automatically follow the new price.
Why does an assignment purchase need more cash than a regular purchase of the same property?
Because your lender sizes the mortgage against the lesser of the original contract price and the current appraised value, not against the higher assignment price you actually agreed to pay. The gap between what the lender will lend against and what you owe the assignor is the assignment premium, and that premium has to be paid in cash. On a typical deal that gap can run into tens of thousands of dollars.
What is the lesser-of rule on an assignment?
It means the lender picks whichever number is lower between the original contract price and today’s appraisal, and lends against that figure only. It protects the lender from financing a price the appraisal cannot support. It also means the assignment premium is structurally excluded from the mortgage no matter how the deal is negotiated.
Does Ontario land transfer tax apply to the full assignment price or just the original contract price?
Ask your real estate lawyer, because the treatment of the premium is not something to assume. The figures here are calculated on the full assignment price, which is the cautious way round: if the tax turns out to be assessed on a smaller number you are holding back cash you did not need, which beats arriving at closing short.
Does GST or HST apply to an assignment premium?
That is a Canada Revenue Agency question, and it sits outside every figure on this page. Assignment premiums have federal tax treatment that depends on the details of the deal, and it can add real money to what you need on closing day. Speak with an accountant before you sign, not after.
Can you finance an assignment purchase with less than 20% down?
Yes, at 5% down where the lender and the file allow it. The insurer lends against the lesser of the contract price and the assignment price, so on a $700,000 contract assigned at $780,000 the minimum down payment is $45,000 and the base mortgage is $655,000, leaving $125,000 in cash. That is $95,000 less than the same deal at 20% down. Ask us to confirm it with the lender before you rely on it.
What happens if the appraisal comes in below the original contract price?
The lending value drops to the lower appraisal, which shrinks your mortgage further and increases the cash you need at closing. Every $20,000 the appraisal falls below the original contract price adds roughly $16,000 to your cash requirement, because the mortgage shrinks by 80% of the drop while the price you owe the assignor does not move. A falling market can hit an assignment buyer twice.
How do Ontario and Alberta compare on closing costs for the same assignment?
Ontario charges a provincial land transfer tax that runs into the thousands of dollars, and Toronto adds a municipal land transfer tax on top of that. Alberta charges no land transfer tax at all, only small registration fees on the transfer and the mortgage. On a $780,000 assignment, the registration difference alone is more than $10,000.
Will any lender finance an assignment purchase?
Lender appetite for assignment deals varies and is not settled by a general rule. Some lenders are comfortable with assignments and others avoid them entirely, and that can change file by file. Talk to a broker early, before you sign anything, to find out which lenders are actually open to your specific deal.
What should I have ready before I make an offer on an assignment?
Have your full down payment on the lending value plus the entire premium in cash confirmed and accessible, not assumed. Get a realistic sense of current appraised value for the unit before you commit to a price. Talk to a broker about financing before you sign the assignment agreement, not after.
Is financing an assignment the same as financing a pre-construction purchase bought directly from the builder?
No. A direct pre-construction purchase is financed against the price you actually agreed to pay the builder, subject to the usual appraisal checks at closing. An assignment is financed against the lesser of the original contract price and the appraisal, which is often lower than what you are actually paying the assignor.
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