When you purchase a preconstruction property in Ontario, you’re typically waiting for the property to be constructed and registered before you start paying a mortgage.

However, most builders will require a mortgage pre-approval letter from you at the time of purchase to show that you can afford the property. Previously, pre-approval letters from mortgage brokers were accepted, but developers now ask for letters from one of the major Canadian banks.

When your preconstruction property closes in the future, you are free to stay with the same bank or choose a different lender. Don’t forget that you will once again also have to qualify for lending at the time of closing.

Some builders will partner with a bank during the sale phase, and buyers who choose that bank for financing may enjoy special promotions or offers, including the ability to lock rates.

One important difference between buying a resale home and preconstruction property is the timeline. Resale homes typically close within 30-90 days, while some preconstruction properties can take 4-5 years to complete. 

This means that delays in preconstruction properties can occur due to bad weather, labour conditions, market forces, supply shortages, and economic factors.

Larger developments, including new homes and condo projects, are often built in phases. Properties in later phases tend to be more expensive and will have later closing dates.

If you purchase a unit in a larger project, you’ll likely receive the keys to your property when the unit is done, even if the rest of the project isn’t.

This is known as the interim occupancy phase, and many first-time preconstruction buyers are surprised to learn that they must pay a significant monthly fee while they wait for the rest of the project to be completed. In part five of this guide, we’ll discuss interim occupancy fees in more detail. 

Once the entire project is completed and registered with the municipality, the final closing with your lawyer will take place, and your mortgage (if you have one) will officially start.

Preconstruction purchases often require deposits in installments. Typically, a builder will ask for 5% at the time of signing, followed by additional deposits throughout the construction phase, and a final payment at closing. Many projects offer different deposit structures, so it’s important to ask your realtor about what may be available.

There’s a lot that goes into choosing the perfect preconstruction property. How will you know which floor plan to buy? An experienced preconstruction realtor can help you quickly filter units that meet your budget, preferred layout, and living requirements.

In condo developments, the unit’s location influences natural light, noise levels, and views. Your realtor can assist you in weighing the pros and cons of various exposures and floor levels. Many projects will charge a premium for units located higher in a building. Your realtor should be able to inform you of the additional cost involved.

Here is a checklist of things you’ll need to consider:

• Floor plan layout
• Square footage and usable space
• Number of bedrooms and dens (if required)
• Price per square foot
• Building design and location
• Balcony or terrace size
• Ceiling height
• Standard finishes or upgrade options
• Appliances
• Building amenities
• Parking
• Additional storage like a locker
• Estimated maintenance fees (and what they cover)

One important advantage of working with a realtor is having access to numerous projects to consider. This allows you to compare floor plans, builder reputation, location, and pricing to help you make an informed decision.

Builders will often offer a variety of incentives or promotions during presale. If you work with a realtor and have access to the project before the public sale is launched, you’ll be able to enjoy better incentives and discounts.

Keep in mind that these incentives are often not promoted to the general public, so having an experienced preconstruction realtor can provide you access to these offerings. Some of these incentives are available at launch, while others may remain accessible if the project hasn’t sold out yet. Your realtor will be able to negotiate the best incentives for you.

Let’s look at a list of possible incentives you may: 

• Upgraded countertops 
• Upgraded flooring 
• Upgraded appliances 
• Discount on purchase price (or cashback) 
• Reduced closing costs 
• Extended deposit schedules 
• Lower upfront deposits 
• Reduced or free parking and storage 
• Discounted maintenance fees for the first 1 or 2 years 
• Cash to spend on builder upgrades 
• Free assignments 
• Right to lease during occupancy 
• Rental program for investors 
• Capped development charges 
• Financing promotions 

Negotiating these at the time of purchase is crucial, as is ensuring that any incentives or promotions are included as schedules in the Agreement of Purchase and Sale.

Reach out to our Team Paliwal today to explore your options and discover how you can enjoy a balanced, fulfilling lifestyle just a short journey from downtown Toronto.

Finding the right home can be overwhelming with so many choices and potential pitfalls. Since 2009, Team Paliwal has been turning challenges into opportunities.

Buyers often face issues like navigating a fast-moving market, understanding how much to offer on a property, and managing the challenges of buying a home. Our team brings deep market knowledge, seasoned negotiation skills, and a personalized approach to make sure you’re protected.

Our unwavering priority is always putting our clients first. This is why Team Paliwal is ranked #1 and top 50 real estate teams on Canada on RankMyAgent,com. Our high ratings from satisfied clients is proof that you can get a well negotiated deal, avoid costly mistakes, and find a home that checks off all your boxes.

Let us simplify your journey to homeownership anywhere in the Greater Golden Horseshoe and help you find your perfect home. Join hundreds of happy clients who made the choice to hire Team Paliwal!