New Construction vs Resale: Key Differences
Buying a new construction home in Canada is fundamentally different from buying a resale property. You are often purchasing before the home is built, signing a lengthy purchase agreement prepared by the builder's lawyers, and relying on a warranty program rather than a home inspection.
| Factor | New Construction | Resale |
|---|---|---|
| Purchase timing | 1–4 years before occupancy | 30–90 days to close |
| HST/GST | Included (rebate may apply) | Exempt |
| Home inspection | PDI (Pre-Delivery Inspection) | Full third-party inspection |
| Warranty | Builder warranty (Tarion in ON) | As-is (no warranty) |
| Price changes | Cap on increases (limited) | Fixed at accepted offer |
| Customization | Upgrades and finishes | What you see is what you get |
Deposit Structure for New Builds
Unlike resale homes where you typically put down 5–20% at closing, new construction uses a staged deposit structure spread over months or years of construction:
- Signing: $5,000–$100 initial deposit (same day)
- 30 days: Top up to 5% of purchase price
- 60–120 days: Additional 5% payment
- Occupancy / Closing: Remaining balance via mortgage
HST on New Construction in Canada
New homes in Ontario are subject to 13% HST (5% federal GST + 8% provincial). The purchase price advertised by builders typically includes HST minus any applicable rebates, but always confirm this in writing.
Ontario HST New Home Rebate
- Full federal rebate available if purchase price is under $350,000 (up to $6,300)
- Partial federal rebate phasing out between $350,000–$450,000
- Ontario rebate of up to $24,000 available on homes under $400,000, phasing out to $500,000
- If buying as investment (not primary residence), you must remit the rebate to CRA
BC GST New Home Rebate
- Full federal GST rebate if home under $350,000
- Partial rebate phasing out between $350,000–$450,000
- BC has its own provincial rebate program — consult a tax accountant
Tarion Warranty (Ontario)
In Ontario, all new homes must be covered by Tarion warranty. Tarion provides three levels of protection:
- 1-Year Warranty: Defects in workmanship and materials
- 2-Year Warranty: Water penetration, electrical/plumbing/heating, exterior cladding
- 7-Year Warranty: Major structural defects
Other provinces have equivalent programs: BC's New Home Warranty Insurance, Alberta's New Home Buyer Protection Act, and so on.
Pre-Delivery Inspection (PDI)
Before taking possession of a new home, you'll complete a PDI walkthrough with the builder. This is your chance to identify defects, incomplete items, and damage. Document everything in writing and photograph issues. Items noted during the PDI must be repaired under warranty.
Common Risks with New Construction
- Occupancy delays: Builders can legally delay closing multiple times
- Levies and fees: Development charges, utility connection fees, and other levies may be passed to buyers
- Mortgage rate changes: If rates rise significantly during construction, you face a higher payment than planned
- Builder insolvency: A deposit protection program covers up to a set amount (e.g., $20,000 in Ontario per Tarion)
- Upgrade cost overruns: Upgrades at the builder's design centre are typically marked up 200–400% vs market
Frequently Asked Questions
Can I back out of a new construction purchase?
In Ontario, you have a 10-day cooling-off period after signing a pre-construction agreement. After that, cancelling typically means losing your deposit and potentially facing a lawsuit for damages. Some builders allow assignment (selling your contract to another buyer) if you need to exit.
Can I lock in a mortgage rate before the new home is built?
Some lenders offer extended rate holds (90–180 days) but new construction often takes 1–3 years, making this impractical. You'll typically arrange financing closer to the final closing date. Rate fluctuations over the construction period are a key risk to plan for.
What is an interim occupancy period?
In Ontario high-rise condos, there's often an "interim occupancy" phase where you move in before the building has been legally registered as a condo. During this time you pay "occupancy fees" to the builder (roughly equivalent to a mortgage payment + condo fee) but don't yet own the unit. This can last 6–24 months.
Are new construction homes GST/HST exempt for first-time buyers?
No, GST/HST always applies to new homes. First-time buyer status doesn't change this. However, you may qualify for the HST New Housing Rebate if the home will be your primary residence — regardless of whether you've owned before. The rebate is based on use, not buyer history.
How much should I budget for upgrades in a new build?
If you want to upgrade from builder-grade finishes, budget 5–10% of the purchase price for the design centre. Kitchen upgrades (quartz counters, upgraded cabinets), flooring, and bathroom finishes add up quickly. Get quotes from third-party contractors after closing — often 50-70% cheaper than the builder.