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Financial Facts

The Financial Facts about Buying a Pre-Construction Condo

Finances can be frustrating, especially when the facts aren’t clear. If you have your heart set on buying a brand new condo in the GTA that you can truly call your own from day one, read on as we share some of the most important facts about the finances of buying a condo in the pre-construction phase to help you through your purchase process.


Pre-construction condos are more affordable than you may think.

The idea that the average individual or couple cannot afford to purchase a condo in downtown Toronto or the GTA is simply untrue. In fact, purchasing a condo (in many cases) is a more affordable and desirable option than a freehold home, especially in Toronto’s core.

According to the National Bank’s chief economist, Stéfane Marion, “The single-family home market has become unaffordable and that’s the reality for markets such as Vancouver and Toronto.” That has pushed many first-time buyers into the condo market, which has actually become more affordable for such buyers because of an abundance of supply, explains the Globe and Mail.


Deposits are typically spread over a period of time.

A typical deposit for a pre-construction condo suite for a Canadian buying from a builder is 20% of the purchase price (international buyers typically pay 35%). Now, if you’re buying a $500,000 suite, 20% is a significant chunk of cash, especially all at once. Luckily, quality and trusted builders don’t require a lump sum payment. Instead, payments are usually spread out over a period of time, sometimes as long as 15 months.


Your deposit is well-protected.

When buying a pre-construction condo from a reputable developer, your purchase fees will include a Tarion Warranty Corporation enrollment fee that provides deposit protection of up to a maximum of $20,000. This way, in the unlikely event that the condo project is not completed, the financial loss will be less significant.

TIP: Even though your deposit is fully protected by the Condominium Act and most likely a Tarion Warranty, it’s always a good idea to ask the sales centre representatives what other rules and approvals the builder has in place to prevent fraud and ensure your deposit is completely secure.


There’s more to condo ownership than a deposit and mortgage payments.

When looking to buy a condo, it’s easy to overlook the total cost of ownership, which ends up being more than just the deposit and mortgage payments. Maintenance fees, property taxes, utilities and so on also factors in your budget. Then, there are closing costs, which are a very important consideration when buying a pre-construction condo. Closing costs include land transfer taxes, meters, legal fees, warranty fees, development levies and administration fees.


When you buy a condo, you’re contributing to the community.

Condo developers are required to pay certain development levies to municipalities to help fund city infrastructure. In exchange for approved increases in height or density, developers often make monetary contributions to help build public community centres and parks near the building site which is great for your lifestyle and contributes to the local community.

TIP: If you’re buying from a developer, it’s important to determine how they manage these fees. Are they included in the purchase price, or will they be added to the bill later?


Reputable builders will not attempt to hide any closing costs from you.

In fact, they will actively work to include any extra fees into the price of the suite so that they can be included in your mortgage payments. However, it never hurts to do your due diligence and have a laywer review the Agreement of Purchase and Sale, Disclosure Statement and the Tarion Addendum (if there is one).


Look out for prices that seem too low.

If a suite by one developer seems more expensive than the rest, it doesn’t necessarily mean you’re overpaying. It could mean that all of the costs are being included in the purchase price that the quality of the construction and finishes are a higher calibre than the rest.

TIP: Beware of developers who try to entice you with low prices as you may not get the quality you’re expecting (and you could end up cutting a big cheque at the time of closing).

**Based on an article by Tridel Inc.

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