For some buyers, there’s nothing quite like a new, freshly-minted condo. Whether you’re looking for the ideal place to call home or a fantastic investment, pre-construction condos can provide some major advantages. That said, the process of acquiring one is unique. Understanding the ins and outs of buying brand new will help ensure that your purchase is an informed one.
If you’re thinking of securing a pre-construction condo, here are five things you should know…
1) Your deposit will be different
When you’re buying a home, you’ll put down a deposit as a good-faith gesture to the sellers (this amount ultimately goes towards your down payment, so it’s not an additional cost). While there’s no set minimum, around 5 per cent of the purchase price is pretty typical for a resale unit in the GTA.
Pre-construction deposits are a little different. As a rule, you’ll need around 15 to 20 per cent to secure a new unit. Fortunately, the deposit structure is flexible—which means you don’t need to pay it all at once.
There’s usually a set amount due at signing, and then the remainder of your first 5 per cent within 10 to 15 days. The rest is paid in installments. That might mean another 5 per cent at 30 days, the same amount at 90 days, and then again at 180 days.
2) You’ll need to be patient
Buying a pre-construction condo allows you to get in on the ground floor. If you’re planning to buy a brand new unit, you probably already know that a decent chunk of time is going to pass between when you find your condo and the day you can occupy it.
From launch to construction to occupancy and registration, the entire process can take approximately three years (though it doesn’t always take that long). It’s also worth noting that delays are common. Condo buildings are complex, and there are many challenges that can arise during their completion.
Some delays are allowable, and it’s not unusual for a building to take six months or longer than the initial timeline indicated. But you may be entitled to compensation if your builder misses important dates laid out in your agreement.
3) You’ll pay HST
When you’re budgeting for the initial costs associated with buying pre-construction condos, make sure you account for HST. This cost, which comes in at 13 per cent of your purchase, will either be paid upfront or included in your mortgage (depending on the builder).
The good news? Both end-users and investors can get a sizeable amount of that HST amount back (you could get up to a maximum of $24,000). Just make sure you know the legalities around claiming it. For example, if you sell your new property within one year of purchasing it, you’ll need to return the rebate amount to the CRA (Canadian Revenue Agency).
4) There’s an interim occupancy period
Some pre-construction buyers are surprised to learn that they may not own their units the day they settle in. More often than not, a development is safe for residents before it’s been fully completed and inspected. As a result, you might have the opportunity to move into your unit prior to building registration.
During this time (known as the interim occupancy period), you’ll pay rent while you live in or lease the condo. This amount is approximately equal to your mortgage and condo fees plus tax.
5) You’ll automatically get an inspection
When a buyer makes a bid on a resale unit, they’ll often make their purchase conditional on a successful inspection. Of course, that’s not always the case. In hot markets, they may feel that they must forgo this step to increase the chances that their offer will be accepted.
When you’re buying a pre-constructional unit, you can rest assured that having it looked over by a professional is part of the process. Every brand new condo receives a pre-delivery inspection (PDI). This is your opportunity to walk through your new space with the builder—and flag any potential deficiencies.
From advanced customization options to the opportunity for your unit to increase in value by the time you take ownership, there are many benefits to buying pre construction condos. That said, there are a few things to know about the process of securing one. By working with an agent who’s a true condo expert, you can ensure that the unit you purchase is right for you!
Thinking of buying a pre construction condo? Get in touch to learn more about the steps involved—and how we can help.