Buying a condo at blueprint stage can net you savings over buying a resale unit. But there are other differences, too. Here are 10 things you need to know about buying a pre-construction condo.
Expect to put 20% down
You can buy a resale condo with as little as 5% down, but for pre-construction condos, a 15-20% down payment is standard. After your initial 5% sales deposit, the balance is paid in installments up to closing, so don’t worry if you don’t have the full amount upfront. In fact, you could have up to three or four years to pay, because…
Some pre-construction condos are delayed
Many condo buildings are not always ready in the often-ambitious time frames provided by developers. Plan to move in six months later than the original move-in date. But have a backup plan in case delays push into the one-to-two-year mark.
You can lock in your mortgage rate ahead of time
Developers work with preferred mortgage providers, and if you qualify, you’ll be able to lock in at today’s low-interest rates, to come into play once you close on your condo.
You’ll have to pay HST
Unlike resale condos, new-build condos are subject to HST. Good news: your purchase may qualify for the GST/HST New Housing Rebate program.
New-build condos can come with extra closing costs
Everything from HST on new appliances to utility connection fees and other builder/developer adjustments can pump up your purchase price by 1-3%.
The building may not look like it did in the videos and model showrooms
Developers have leeway to amend their plans. That indoor-outdoor pool may end up fully enclosed, and those rustic-urban red bricks may end up a chic grey instead. Preconstruction comes with surprises, so be flexible.
You may be a tenant for longer than you planned
Your condo may be ready for move-in before the building is fully complete. If that’s the case, the building can’t be set up as a condo corporation, and you’ll rent your unit from the developer, rather than owning it and paying your mortgage to the bank.
Your condo fees may rise
Condo developers entice potential buyers with artificially low monthly maintenance fees. After you’ve been in your home for two or three years, the fees can creep up by significant amounts, so keep that in mind when you budget.
Get the right to sell or assign your pre-construction contract
Try to negotiate a clause in the sales contract that gives you the right to cancel the sale if unemployment, injury or other drastic circumstances prevent you from closing. This could save you tens of thousands of dollars down the road.
You can change your mind
In some jurisdictions when you have second thoughts, you can cancel the purchase of a pre-construction condo – and get your entire deposit back – during a specified “cooling off period.”
Bottom line: Buying a pre-construction condo offers excellent value, but do your research first to get the right deal for you.