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Buying a house is exciting; buying a new house even more so. Unlike when you buy an existing home, purchasing a brand-new pre-construction house provides you with the opportunity to tailor the layout and design. This ensures you are able to make alterations that will result in your ideal finish.

Pre-construction home purchases have a range of advantages, but there are a number of factors to consider if you are interested in this option.

Things to consider before buying a pre-construction home

Pre-construction homes require a big deposit

Whether you are looking at a pre-construction townhouse or a smaller condo, a large deposit is required when buying pre-construction homes in Ontario. While some mortgages for existing homes require deposits as low as 5% (with mortgage insurance), loans for pre-construction houses require a minimum of 15-20% depending on the lender.

When buying a pre-construction house, the deposit is not collected in one lump sum. Instead, the purchaser will put down a 5% deposit upon signing the contract. The rest of the deposit value will be collected in installments, with the complete amount being due by the specified closing date.

HST is applicable to pre-construction houses

HST must be factored into your budget when buying a pre-construction home in Ontario. Unlike existing home sales, HST is added on top of the house sale price of pre-construction houses. There is a GST/HST New Housing Rebate program so if you are eligible you may be able to claim some of that money back, although it is important to factor it into initial costs.

Delays are common when buying a pre-construction house

Delays are always possible with house construction projects. Whether you’ve purchased a detached home or a pre-construction townhouse, there is a range of unexpected occurrences that can delay the building process. Always have a back-up plan in case things go wrong and your house is not ready on time.

It is sometimes possible to move into a pre-construction house before it is completed

If you are buying a pre-construction condo or townhouse, it may be possible to move in before the entire development is completely ready. For instance, if your specific apartment is finished but other ones in the building, or the building itself, is not entirely ready, it might still be possible for you to shift in.

Take note that if the development is not completed in its entirety the builder will remain on the title. Therefore, you will essentially be paying them to rent until the construction project has been completed and the title is transferred to you.

Mortgage rates can be locked in

When purchasing a pre-construction home, you will be provided with estimated completion dates. For some development projects, houses may not be due for completion for several years. A benefit of pre-construction homes is that you can lock-in your mortgage rate at the time of purchase, as opposed to the date when the title gets transferred to you. This may be a good option for somebody looking to get into the market when interest rates are low as you can lock in your mortgage before construction has even started. If you are interested in getting into the property market now, contact Paradise Developments for information on their current projects.

Many contracts for these homes have an assignment clause

Given that construction can take a number of years, most companies provide an assignment clause in their purchase contracts. They understand that a lot can change during this time and purchasers may change their minds and want to sell their property. If you have purchased a pre-construction house and decide that you would like to sell during the construction phase, an assignment clause lets you sell your contract to another buyer. Essentially, they will take over your contract and be the owner of the completed house.

Cancellation of the development is always a possibility

Every now and then, an entire development project will be canceled. This is always a risk you take when purchasing a pre-construction home, especially if it is in a new estate. This can be extremely inconvenient and really disrupt your plans. It is especially irritating if you thought you had a particular price locked in and house prices have since increased.

Some companies have policies in place to assist buyers in this instance. The Ontario government has implemented a law where purchasers are refunded their entire deposit with an additional $20,000 if the deposit is returned later than 10 days after a contract breach.

There are numerous benefits associated with the purchase of a pre-construction home, although it is worth considering these factors to ensure you have plans in place should something go wrong.


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