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Pre Construction Condos & Detached Homes, 2855 Markham Road Suite 300, Toronto, ON (2026)

10/19/2021

Advantages of Buying Pre-Construction Pre Construction Condos & Detached Homes
Since you are buying the condo before it’s built, your condo unit is brand new. It will be equipped with advanced technology and building systems that make your living experience more comfortable.
Extended Deposit Structure: The deposits for a down payment are spread over several months.
Discount: You can get discounts and incentives at the Platinum Stage and the VIP Stage.
Today’s Prices, Tomorrow’s Value: The condo unit is priced using today’s market value. However, during construction, your condo may appreciate in value.
Flexibility: Typically, you can select between different unit packages. Some developers also allow customizing the unit with different finishes or upgrades, however, these are much more expensive.
Urban Location: Pre-construction condos are usually located in dense cities with plenty of opportunities. Condos are the only way to reasonably live in these areas and pre-construction condos get you a premium spot.

10/19/2021

Financing a Pre-Construction Condo Purchase
Nearly everyone who buys a pre-construction condo unit will need to finance their purchase with a mortgage. By using a mortgage to buy a pre-construction condo, you can invest in this asset and take advantage of rising real estate prices. Current mortgage rates are at all-time lows with the lowest 5-year fixed mortgage rate in Canada at 1.69%. However, buying a pre-construction condo is a heavy financial burden and there are many things you should consider when making the purchase.

Minimum Down Payment: While many mortgage programs reduce your minimum down payment to as low as 5%, with a pre-construction condo unit, you will have to make a minimum down payment of 20% in most cases by the time construction is completed. Fortunately, the down payment is spread out over multiple payments and the property is priced at today’s fair market value. By the time you finish making your down payments, the house will have appreciated and you can benefit from the profits.
Mortgage Pre-Approval: Most pre-construction condo developments will require that you get pre-approved for a mortgage if you want to secure a unit assignment. This gives the developer some guarantee that you will follow through with the unit purchase. If the developer has sold most of the units and has enough people financing the construction, developers may allow you to get a unit without a pre-approval.
Generally, developers will request mortgage pre-approvals within the first 30-90 days after signing your agreement, but you should aim to secure financing within the 10-day cooling-off period. This way, you can back out of the purchase if you have trouble with your finances.

Credit History: One of the most important things lenders will look at is your credit history. Past payments and debt obligations demonstrate how much of a credit risk you are going forward. You should regularly maintain your credit score because many lenders and mortgages have minimum credit score requirements. Generally, you need a minimum credit score of 600 for most banks, 550 for B-lenders, none for private lenders, and 600 for CMHC insured mortgages. However, you should aim for a credit score above 680 for better mortgage rates, which is considered good, and above 760 to get the lowest mortgage rates.
Debt Service Ratio: Lenders will factor your Gross Debt Service (GDS) and Total Debt Service (TDS) ratio into your mortgage eligibility. These Debt Service Ratios help lenders determine how well you can cover your monthly debt obligations and affect your mortgage rate and eligibility. If you want to buy a pre-construction condo unit, you should ensure that you have paid off as many of your other debts as possible before applying for a mortgage.
Key Factors in a Pre-Construction Condo Purchase Agreement
Your purchase agreement (Purchase and Sale’s pre-construction Agreement) is the most important document to understand with a pre-construction condo unit. It covers your rights, the developer’s rights, your assigned unit, and the development. It highlights all your legal and financial obligations and protections. You should have your lawyer carefully review your purchase agreement and inform you of any relevant details. Namely, these are the most important things to look for in a purchase agreement:

Unit price and deposit amount/details
Possession date - when you receive ownership of the property
Details about your assignment rights and limitations, plus any assignment-related costs
Occupancy period details including if you have permission to rent out the unit during the occupancy period and the occupancy fees
Caps on various closing costs and utility installments
Administrative fees
First-year maintenance fees
Contingencies like a mortgage pre-approval

10/19/2021

Investing in a Pre-Construction Condo Unit
Pre-Construction Units as an Investment
In North America, Toronto is one of the fastest-growing cities and currently the 4th most populated city. Even with continuous condo construction, the housing demand of Toronto far exceeds the speed at which condos are being built. This means that demand outweighs supply, and real estate prices have been rapidly increasing, which makes condos seem like the only source of affordable housing.

While pre-construction condo units are a good investment, buying a condo unit yet to be constructed should be seen as an investment rather than a living arrangement. Investing in pre-construction condos carries a large amount of risk that buying a unit of residence outright does not. For example, developers can cancel projects, change the design, and will inevitably delay construction. Pre-construction condos should not be considered reliable future housing and if you decide to purchase a pre-construction condo unit, you should ensure you have stable housing elsewhere for the foreseeable future.

Pre-Construction Condo Market Overview
Much like the rest of the real estate market, the pre-construction condo market operates as a function of supply and demand. When demand is low and supply is high, prices are low. When demand is high and supply is low, prices rise as is the case in Toronto. Toronto is the second most expensive city in Canada next to Vancouver. Condos are no exception as their easier accessibility in high-density and urban locations puts them in high demand. However, demand for condo units and pre-construction units spiked recently because of two major factors.

COVID-19: COVID-19 caused governments to decrease interest rates to all-time lows. This made getting a mortgage significantly cheaper and gave home buyers much more buying power. Additionally, condo prices fell during COVID-19 by as much as 13% during the first quarter of 2020 as urban residents moved to less populated areas to work from home. With Toronto’s high real estate prices, many investors saw this as an opportunity to get some cheap property with a low-cost mortgage and condo prices have once again begun increasing rapidly with the average sold price of a condo at $683,479 in June 2021.
Population: Even in the face of COVID-19, the Canadian government is still committed to its goal of bringing more than 1.2 million immigrants by the end of 2023. This will significantly increase Toronto’s population and demand for real estate will follow. Toronto is a notorious seller’s market because of the high population density and the relatively slow rate of real estate construction. With the new immigrants and Toronto’s already high population growth of .93% annually, the housing shortage is expected to increase.
Toronto is known for having a low supply of new homes even with constant construction. With COVID-19 ending and employees returning to their offices, the demand surge will overwhelm the capacity of current pre-construction projects. In the fourth quarter of 2020, there were over 78,000 pre-construction condo units throughout all stages of development, but this is unlikely to match the impending demand increases. Pre-construction condo unit prices will likely continue to rise during the third and fourth quarters of 2021.

10/19/2021

Pre-Construction Condo Maintenance Fees
Maintenance fees are ongoing monthly expenses required to help the building and its essential services. While this fee does not exist if you purchase a standalone home, it is recommended that each month, homeowners set aside a sum of money for home maintenance and repairs. In a condo, this fee exists to make sure that every resident contributes their fair share to the proper maintenance and services of the building. Your monthly fee is used to pay for:

Indoor and outdoor common areas
Building maintenance and repairs
Shared amenities available to all residents
Building management and employees
Certain utilities (can include hydro, water, gas, and more, but this varies between buildings)
A required contribution to your condos reserve fund as per the Condominium Act
There are also optional monthly fees that would be added to your maintenance fee. These pay for certain amenities such as:

Building parking ($50 - $100)
Lockers ($15 - $25)
Make sure that your lawyer informs you of what your maintenance fee pays for because maintenance fees vary. On average, you should expect to pay 65¢ per square foot in the GTA, which will cost about $500 per month for a normal condo unit.

During the first two years following construction, the developer pays for any budget deficiencies, but after these two years, residents take responsibility for this extra expense. You should expect your maintenance fee to increase by 10-20% after your first two years of residence. You should also expect maintenance fees to increase over time as the building accumulates higher costs.

10/19/2021

Capping Closing Costs
If at all possible, you should get as many of your closing costs capped in the purchase agreement. Many of these costs are more than significant and in the case of development charges, surprise increases could be the difference between affording the property and defaulting on payments. Toronto changes its development costs regularly and in recent years, these costs have been rising rapidly. Many things can change while your unit is being constructed and by setting a maximum limit on closing costs, you limit your exposure to unexpected increases in your final expenses.

If you ever hear the term “hard cap” or “soft cap”, make sure that you opt for a hard cap on closing costs. A “hard cap” sets a maximum limit on the final amount of development charges while a “soft cap” only sets a limit on the increase in development charges. This means that even if you have a soft cap on your development charges, you could be responsible for paying the original development charge amount plus the full soft cap amount if the municipality increases development charges by this much.

10/19/2021

Tarion Deposit Protection
Tarion is a not-for-profit organization established by the Ontario Government that protects home buyers. Their deposit protection insures deposits if your purchase agreement is terminated by the builder. This includes if the developer goes bankrupt, they fundamentally breach your purchase agreement, or you have a statutory right to treat your purchase agreement as terminated.

Your deposit must be returned within 10 days following the termination of your agreement by the developer. If it is not returned, Tarion provides deposit insurance of up to $20,000. In this case, you must contact a lawyer to submit your claim.

10/19/2021

How to sell pre-construction condos
There are two ways to sell your pre-construction condo unit. The method that you use depends on the timing of your sale.

1. Sell the Condo Assignment
Before you own a condo unit, you enter into an agreement that gives you ownership when the building is completed. At this point, you do not own the condo unit, but you are given a unit assignment (future ownership of a specific unit). You can sell this to another home buyer, which gives them the future ownership and payment obligations associated with the condo unit.

2. Sell the Condo After Taking Ownership
When the occupancy period ends, the developer will register the building with the city. A date and time is then set that determines when you can transfer ownership of the property. The key difference is at the time of sale, you own the property and are selling a personal asset.

Depending on how you sell your unit, you may have to pay more taxes or you may be eligible for a tax rebate. If you have any questions regarding HST taxes, Capital Gains taxes, or Selling Your Unit, speak with your real estate broker.

What if pre-construction condos are cancelled?
In rare cases, a developer might not finish the condo project even though you have already bought a pre-construction condo unit. If this happens, your deposit is partially protected.

10/19/2021

Financing a Pre-Construction Condo
How do pre-construction condo down payments work?
Down payments for pre-construction condos are not one-time lump sum payments like a regular mortgage down payment. Pre-construction down payments are usually split into 4 equal payments of 5% of the unit price with a $5,000 deposit at signing. Most projects will follow this general guideline, but it is entirely up to the developer.

$5,000 when you sign your contract (If you cancel your contract within the cooling off period - 10 days, this is returned to you)
5% minus $5,000 within 30 days
5% within 3-6 months
5% within 9-18 months
5% during the occupancy period
This structure is not fixed and only a reference for home buyers. Developers may change the down payment requirements or reduce the frequency of payments as part of promotions. For example, a developer may say that for a limited time, the minimum down payment requirement is only 10% or that deposits are delayed by a month.

During the occupancy period, you will also be required to pay occupancy costs or interim occupancy fees (rent), which are paid a monthly basis before you own the condo unit. These payments are determined by the developer and are effectively rent payments that let you live in the unit until ownership transfers to you. The Condominium Act prohibits any profit-seeking activities using this fee, so you are not paying any extra money to the developer.

10/19/2021

How to pick a pre-construction condo
When looking at different units, you should consider multiple factors. There is little risk associated with getting a unit, but the quality of your unit can vary. Here are some things to consider:

What to look for
Affordability: While condos are cheaper than freestanding units, buying one is still a significant purchase. You should make sure you have enough saved for deposits and that you can afford a mortgage. Understanding how much you can afford will help you decide between different units.
Good Developers: The developer behind the project should be a key factor in your decision. Ultimately, they have control over the construction over your unit, so you should make sure that the one you pick is good. Make sure that the developer’s past condos meet your standard, which includes everything from their finishes to the building design.
Price vs Location: More popular locations are usually more expensive. The reputation of the developer will not affect prices, so consider the trade-off between a good location and the increased price.
What to avoid
Past Cancellations: If the developer has cancelled projects in the past, the risk that they will cancel their current project is much higher. Even with deposit protection, you may still lose part of your deposit and you will have to find a new unit.
Small/Inexperienced Developers: If you cannot find past projects of theirs, they may not have any. The risk of both a cancellation and the project turning out poorly increases if the developer does not have the resources or experience to guarantee a high-quality building.
Previous Lawsuits: Check the developer’s history and avoid them if they have been sued because of their buildings. Lawsuits generally arise because developers fail to meet building expectations.

10/19/2021

Buying-The Public Stage
Any units that have not been sold during the previous 3 stages are sold during the Public Stage. Developers will list units on their websites, but brokers can help you find the best units and search for other projects at the Platinum Stage or the VIP Stage.

Price: Full Price
This is the most expensive stage to buy a pre-construction condo. Developers may still increase or decrease the price at their discretion, but this is generally the final unit price.

Access: Widely Available
Units are available to the general public. Home buyers can see units specifications and prices directly on the developer’s websites. You can also talk to a real estate broker that can help you find the best deals and options.

10/19/2021

The VIP Stage
The Very Important Persons (VIP) Stage is the last private round of offerings to home buyers and usually lasts between 3 months and 2 years at the developer’s discretion. Developers will release about 50-100% of their inventory. Condo units often sell out by the end of this stage. There are usually incentives associated with units sold during the VIP stage.

Price: Limited Discount
The VIP Stage offers a smaller discount than the Platinum Stage. Developers will also periodically increase the price at their discretion. The primary benefit of getting access at the VIP stage is that you can buy units before they are publicly available.

Access: Available
Real estate brokers have access to the VIP Stage if they have sold for the developer before. Condos are sold on a first-come, first-serve basis through brokers and brokerage firms. You can buy a pre-construction condo at the VIP stage by speaking with any real estate broker with VIP Access.

10/19/2021

How to Buy Pre-Construction Condos
1. Location
Decide where you want to live. Location is the most important factor in any real estate decision and there are many places that you can get a detached or condo

2. Find a broke
You can apply for the Platinum Stage of many different projects through a very well-connected broker.

3. Find a property
Tell them what location you want to live in so they can focus on projects in that area. You can then further narrow your choice down by giving them certain specifications like the square footage, building features, etc. This will help your broker find a condo project that suits you.

4. Sign a purchase agreement
Sign a contract that gives you future ownership of the condo unit once the building is registered with the city. You will most likely have to make a $5,000 down payment at signing as well.

5. Setup financing
10 days after signing the contract, you will have to pay an initial down deposit to secure your unit. This initial deposit is part of your total down payment and is usually 5% of the condo unit price. You will also need to get pre-approved for a mortgage loan. Banks will only guarantee the mortgage principal amount, so you will have to wait until about 3 months before the closing date before you can lock in a mortgage rate.

6. Make your payments
Continue to make deposits. While you are given the key, you still do not own the unit. However, you can live in the condo unit during the occupancy period and with the builder’s permission, you can also rent out the unit to someone else. At this point, you do not make mortgage payments, but you will have to pay monthly occupancy fees.

7. Take assignment of the property
Once the building is completed, pay the final closing costs and start making monthly mortgage payments. At this stage, the ownership is transferred to you and it is officially your property.

What are occupancy periods and occupancy costs?
Since you are buying an unbuilt condo unit, the developer needs time to finish the project. You receive ownership of the unit when the building is completed and registered with the city, but you can move in about 3-6 months before this date. This period is called the occupancy period or the interim-occupancy period.

The occupancy period starts when your municipality declares the building as “fit for occupancy”. During this period, you live in the unit without owning it. With the builder’s permission, you can also rent this unit out to tenants. The occupancy period typically lasts for 3-6 months, but is shorter if you live on higher floors since these units are constructed last.

During the occupancy period, you will also be required to pay occupancy costs or interim occupancy fees, which are monthly payments to your developer. You are effectively renting the unit from the developer until you receive ownership. You can use your tenants’ rent to cover this fee if you rent the unit out. The Condominium Act prohibits developers from profiting using this fee, but you can still profit by collecting rent payments. Any interest earned on this fee is paid back to you and taxes are calculated after consideration for any amount repaid. Generally, you can expect to pay an occupancy fee close to interest payments on a mortgage plus any municipal taxes or condominium fees.

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