Mortgage brokers, realtors and developers have seen a surge the last few months in people who bought pre-construction condos two to three years ago “scrambling” to get financing to close deals.

Some have had to walk away from deposits worth tens of thousands of dollars. Others have been forced to borrow from family — or against their principal residence — to come up with final payments on condos that lenders are no longer keen to finance, according to interviews with a number of players in Toronto’s condo industry.

Hardest hit have been the self-employed who had pre-approvals from lenders when they bought their pre-construction units. But now, with the unit almost complete and final payments due, they are being told they need 35 to 50 per cent down, instead of just 20 per cent of the purchase price, unless they want to rely on secondary lenders offering rates that can hit double digits.

Many investors who bought units intending to flip them on completion, or rent them out for a few years, have also been shocked to find they thought they had pre-approvals, but they are no longer being honoured in the wake of tighter lending rules imposed by Ottawa.

Toronto real estate lawyer Oksana Miroutenko has had two cases in the last few months where clients took interim occupancy of their new condos, only to find out weeks later, when final payments were due, that they couldn’t meet new, more stringent, financing conditions.

One worked contract jobs that didn’t bring in a steady enough income to satisfy lenders. Another, who forfeited $35,000 in deposits, became pregnant and her husband lost his job after they’d purchased and been preapproved, says Miroutenko.

“This is the hardest environment I’ve seen for borrowing money in the last 10 years,” says Toronto realtor and condo developer Brad Lamb.

He’s had about 800 condo units close in four of his projects over the last year and says just three people were unable to finalize deals.

Another 15 or so sought permission to put their units up for sale on the so-called assignment market — in hopes of selling before final payments were due.

“There were definitely people that were scrambling to close,” said Lamb. While some had taken on more debt than they could handle, the far bigger issue was thousands of dollars in HST and other closing costs, such as escalating municipal development fees, that buyers just hadn’t anticipated when they bought, he added.

But even selling in the assignment market is proving to be much tougher than it was just over a year ago, when federal Finance Minister Jim Flaherty imposed tougher lending rules in an attempt to cool the temperatures in what was seen as overheated condo markets in Toronto and Vancouver.

A unit that sold for, say, $300,000 two or three years ago may be worth about $350,000 today, but many lenders will only finance a new buyer for the original price, not the current market value, mortgage brokers are finding.

That’s making it tougher for pre-construction buyers who run into financial problems to unload their units.

Financial analyst and long-time housing watcher Ben Rabidoux believes these are just the first “cracks” in Toronto’s housing market and could worsen next year when a record number of new condos — estimates range from about 20,000 to almost 43,000 depending on construction bottlenecks — are expected to be completed.

“An estimated 85 per cent of condo units under construction in Toronto have been sold, but they’ve not (all) been sold to end users, and buyers have not yet been financed,” Rabidoux says in a recent note to investor clients. “Therein lies the problem.”

Mortgage broker Jake Abramowicz believes the saving grace, so far, is that condo buyers generally own principal properties, against which they can borrow to complete condo deals. As well, the Toronto rental market is extraordinarily strong, so condo buyers can generally cover their costs by renting units out.

But he still shakes his head at the auditor who called him in a panic a few weeks ago, looking for a mortgage on a $680,000 condo.

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She’d put 20 per cent down on the investment unit but, with closing costs just about due, her bank now wanted 50 per cent down. That’s because she and her husband had stepped up their spending and their costs now exceeded 50 per cent of their gross income — far in excess of what’s allowed under the new lending guidelines.

In the end, she borrowed the difference from a sister and close on the unit, which she now hopes to sell.