10 things to know before buying a pre-construction condo

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.

John D'Souza

John D'Souza

Sales Representative
CENTURY 21 Innovative Realty Inc., Brokerage*
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