There are so many perks to buying a pre-construction condo. Whether new or existing, condos themselves already come with their own set of benefits, including being more affordable than traditional housing, offering on-site amenities, and providing a virtually maintenance-free lifestyle.

But buying brand-new has additional advantages; namely, the ability to tweak the unit with the exact layout and finishes you prefer. Not to mention being able to move into a place that's never been lived in before.


But before you choose to buy pre-construction, it's important that you fully understand everything there is to know about this unique type of transaction.

Here are some important things that all buyers of pre-construction condos should know before entering a transaction.

READ: These Are The Most Expensive Condos In Toronto Right Now

The Deposit Amount Required Is Hefty

When you apply for a mortgage to purchase an existing home or condo, you can get away with putting as little as 5 per cent down for a home loan. While it's always recommended to put down at least 20 per cent in an effort to avoid having to pay mortgage default insurance, this is often a very difficult feat for homebuyers. Luckily, lower down payment options are available.

When you agree to purchase a pre-construction condo, the down payment amount is much higher. You can expect to put down as much as 15 per cent to 20 per cent of the purchase price of the unit for pre-construction condos, which is actually considered typical.

That said, you don't have to fork it over in one lump sum. Instead, you typically give a 5 per cent deposit upon signing. The remaining balance is then paid in installments over a certain amount of time until the closing date.

READ: 6 Common Home Buyer Mistakes And How You Can Avoid Them

Delays Happen Frequently

Much like pre-construction detached homes, delays can and do occur with pre-construction condos. While everything is done to try and make sure that the original closing date is adhered to, all sorts of things can happen during the construction phase that can push the closing date out.

As such, it's common for delays to occur, so if you buy a pre-construction condo, be sure to plan accordingly in case the development isn't completed by the originally promised closing date.

Budget For HST

When you buy a resale condo, HST isn't typically included in the purchase price for you to have to pay. Pre-construction condos, however, require HST to be paid on top of the purchase price.

But don't worry, you may be eligible to apply for the GST/HST New Housing Rebate program, which allows you to reclaim much of that money spent on the HST portion of your purchase.

READ: Ask An Agent: What Happens If My Pre-Construction Condo Is Cancelled?

You Could Move In Before Final Completion

If your unit is ready but the building isn't actually 100 per cent finished, you may still be able to move in. Keep in mind, if that happens, you won't actually be on title just yet. That's because the building can't actually be established as a corporation until the entire complex is complete.

Until then, the builder will still be on the title, and your "mortgage" payments will actually just be rent payments or "occupancy fees" made to the builder until the building is complete. Your mortgage won't actually kick in until final completion.

These occupancy fees encompass the interest portion of the balance owed on the purchase price, based on a combination of factors including a one-year Bank of Canada mortgage rate; the estimated suite maintenance fees; and its portion of estimated real estate taxes, says Barbara Lawlor, president and CEO of Baker Real Estate Incorporated.  When it comes to low-rise homes, Lawlor adds that it works differently because purchasers can only move in once the home closes.

READ: What You Need To Know About Renting Out Your Condo In Toronto

You May Be Able To Assign Your Condo

If you decide at some point throughout construction that you no longer want to buy the place, or you want to flip it to make a profit without having to go through the hoops of taking possession before selling, you may be able to "assign" your contract.

In this case, you'd have to make sure that an assignment clause is inserted in the contract. This will allow you to cancel the sale or assign it to a willing buyer before closing.

You Can Lock In At Today's Mortgage Rates

It could be years before the condo development is completed when you first sign on the dotted line. But that doesn't mean you have to wait until the condo's completion to be able to lock in at a good interest rate for your mortgage.

Condo developers typically deal with mortgage providers right from the get-go. So, if you qualify for a mortgage today, you might be able to lock in at today’s rates.

READ: Toronto Storeys’ Housing Issue of 2018: Condo Cancellations

There's Always the Slight Chance of the Development Being Cancelled

You've probably heard of a couple of condo developments being cancelled in the news over the past couple of years. This can really sting, especially if you bought when prices per square foot were a lot lower compared to where prices are at today.

That said, there may be some recourse with the help of Tarion, a provincial entity mandated by the Ontario government to help protect consumers buying new homes. Not only does the organization provide deposit warranty, but it also reimburses buyers as much as $20,000 in the event that a developer is in breach of contract and does not return the deposit within 10 days.

As with any real estate transaction, be sure to team up with a seasoned real estate agent who can fill you in on all the ins and outs of buying a pre-construction condo so you know exactly what you're getting into.

Toronto Condos & Homes