If you are considering purchasing a pre-construction condo, there are things every buyer needs to know in order to determine if the transaction is right for them. Don’t go into this process blindly – learn what to expect and the timeline of things to come by soaking in a few of our favourite tips every potential buyer needs to know.
If you find a pre-construction condo is right for you, reach out to The Condo Store and to start the process of finding the perfect pre-construction condo for you!
Set aside 20% for down payment
Purchasing a pre-construction condo comes at a steeper price than a resale condo. Thus, expect to pay 10-15% more than a typical resale. This means it’s a good idea to put down at least 20%. In a competitive neighbourhood, consider having, even more, to assist with negotiating (the more of a down payment you can put down, the lower the monthly mortgage payments).
Understand the ‘cooling off period’
While one should never rush into one of the biggest purchases of their lives, it’s easy to be swept away by the grandiose of pre-construction condos. Thus, that’s why every condo buyer has approximately 10 calendar days (note: calendar, not business days) to get their finances in order and confirm they’re ready to go forward with the purchase. During this period, it’s a good idea for the buyer to have their pre-construction condo agreement reviewed by their lawyer to ensure the agreement is legally sound.
HST and added closing costs
Because all newly built condos are subject to the Harmonized Sales Tax (HST), expect to pay 13% of the purchase price. Fortunately, Ontario forgives up to 8%, so you may qualify for a rebate. The added costs of purchasing a pre-construction condo don’t stop there, though. Because each unit must have modern amenities such as appliances, wiring – the bones that make modern living possible – this can bump up the purchase price by a few percentage points. Always estimate what the closing costs will be before agreeing to a contract, and always include them in your estimates as you figure out if a pre-construction condo is right for you.
Condo fees will likely rise by 10-20% in the first few years
This is because naturally, condo fees are arbitrarily set low the first few years of a condo building’s grand opening as they are estimated years in advance. The reality is that developers just don’t know what the real-world condo fees are going to be until the condo has been in operation for a few years. Once the condo has been in operation for a few years, it is much easier to estimate what the condo fees will be – and simpler for homeowners to anticipate their condo fees year-to-year.