If you’re a pre-construction home buyer, you may have spent many years saving up your deposit, and you may feel nervous as you hand it over to your builder.

The fact that your new home warranty includes deposit protection is good to know. If you’re not sure exactly how this deposit protection works, here are answers to the most basic new-home-buyer questions.

How much of my deposit is covered?

If you’re buying a freehold home (that is, where you own the home and property outright), deposit coverage is based on the selling price. For a home that costs $600,000 or less, your deposit is covered for up to $60,000. And if the home you’re buying costs more than $600,000, you’re protected for 10 per cent of the purchase price, up to a maximum of $100,000.

If you’re buying a condo unit, there are two levels of deposit protection. First, your deposit is protected by the trust provisions of the Condominium Act. Under the act, your builder must hold your deposit money in a trust account. As a second level of protection, if for some reason your deposit was not placed in trust, the new home warranty provides protection for up to $20,000.

What about the money I pay for extras?

While some payments you make to your builder are protected, others are not. Deposit protection now covers payments you make for upgrades and extras– like hardwood flooring or granite  counters.

But the new home warranty does not protect any payments that reserve or hold a home before the purchase agreement is signed, nor does it cover deposits provided to builders for lot grading.

What if my builder goes bankrupt or the project gets cancelled?

Your builder is required to return your deposit to you if they go out of business or cancel your project. You’re also entitled to a refund of your deposit if you exercise a legal right to terminate your purchase agreement.

If you’re unable to get a refund from your builder, you can make a claim to Tarion, the consumer protection organization that administers the new home warranty.

Find more information about buying a new home at tarion.com