Pre-construction condos come with unique risks, benefits, and costs that resale buyers never face. Here's the complete guide for Canadian first-time buyers.
KOHO's free banking means every dollar goes toward your first home. Code 45ET55JSYA = $20 bonus.
Open KOHO Free — Code 45ET55JSYAThere are two ways to buy new construction. First, buying pre-construction (off-plan) means purchasing a unit that has not yet been built, based on floor plans and renderings — your closing date may be 2–5 years away. Second, buying a newly completed condo means the building is finished and you close quickly, like a resale purchase. The processes, risks, and HST implications differ between these two scenarios.
Pre-construction condos in major markets like Toronto typically require a deposit of 15%–25% of the purchase price paid in installments over the construction period. A typical Toronto deposit schedule might look like:
These deposits are held in trust and protected (up to $100,000 in Ontario through Tarion's deposit protection). However, your money earns no return while held in trust — factor this opportunity cost into your analysis.
Pre-construction condos have two closing dates — a critical difference from resale. At occupancy closing, you move into the unit and pay the builder an occupancy fee (essentially rent) covering estimated mortgage interest, condo fees, and property tax. The condo corporation has not yet been registered, so you do not own the unit yet. At final closing (typically 3–6 months later), the condo is registered, title transfers, and your mortgage begins. Legal fees apply twice — once at occupancy and once at final closing.
New construction homes and condos are subject to HST (or GST in provinces without HST). The federal GST/HST New Housing Rebate returns a portion of this tax — up to $6,300 federal on homes under $350,000, with a partial rebate up to $450,000. The rebate is typically already factored into the purchase price by the builder — but this assumes you are purchasing as your primary residence. If you are buying as an investment or rental property, you do not qualify for the rebate and must pay the full HST. Many first-time buyers are surprised by unexpected HST costs when buying pre-construction — read your purchase agreement carefully.
As of August 2024, first-time buyers purchasing newly built homes with insured mortgages (less than 20% down) qualify for 30-year amortizations rather than the standard 25-year maximum. This reduces monthly payments on the same mortgage amount — on a $500,000 mortgage at 4.5%, the monthly savings from extending to 30 years is approximately $200/month. This applies to pre-construction condos registering on or after the policy date.
In Ontario, all new homes including condos are covered by the Tarion warranty. Coverage includes: one year for defects in workmanship and materials; two years for water penetration, electrical, plumbing, and heating delivery systems; seven years for major structural defects. As a buyer, you submit a warranty claim through Tarion if the builder fails to repair covered defects. The warranty provides significant peace of mind compared to buying an older resale property where problems are entirely your responsibility.
One of the most common surprises in new condo purchases is development charges, levies, and closing adjustments. These are costs that developers pass on to buyers at final closing — including educational levies, park levies, and development charges that were not finalized at time of contract signing. On a Toronto condo, these adjustments can add $100–$30,000 to your closing costs. Your purchase agreement will specify what adjustments can be passed on — have a lawyer review the agreement before you sign.
No fees eating your down payment savings. Code 45ET55JSYA = $20 welcome bonus with KOHO.
Start Saving with KOHO Free