Buying a new construction dwelling from a builder is an exciting step into home ownership or a new investment opportunity. However, there are many steps you should be aware of before embarking on this journey. Follow along as I walk you through the most important steps of buying a new build!
10 Things you need to know:
-
10-Day cooling off period (aka Rescission)
As set out in the Condominium Act, you have 10 calendar days from signing the agreement to change your mind. This gives you and your lawyer ample time to review the agreement (which is much lengthier than a resale) and make sure you are ok with the terms and conditions.
-
The Wait
While builders will provide an expected completion date for the condominium, rarely (if ever) are condos completed on time. Anticipate a longer than quoted completion date, which can be especially important if you’re an end user.
-
Interim Occupancy Period (aka…Phantom Mortgage)
The occupancy period is defined as the time in which you live or occupy the space, but don’t yet have final closing. The closing date is when you actually own the place. You’re not paying down your mortgage in this time, because it hasn’t been advanced yet. The reason? The title has not yet been registered in your name. This is the time that the builder has deemed the place liveable, but not yet registered. The purchaser is responsible for any maintenance fees, property taxes, or interest. Think of it as paying rent to live in your future home. Unfortunate, but legal. While the time period in which occupancy takes place may vary, anticipate an average of 3-6 months.
-
Condo fees
The mortgage payment isn’t the only monthly payment you will have upon closing if your new build is a condo. Condo fees typically pay for your water, hydro, building insurance, common elements, heat, air conditioning, reserve fund contribution. The good news is that newer builds typically have lower fees, than resale condos, but expect them to increase over the years. Your builder should have a good idea of what your fees will be at time of purchase.
-
Condo documents vs. Status Certificate
A status certificate is a very important document when buying a resale but it is not typically available before the project is done. Instead, the condo documents will include the rules, regulations and budget of your future home.
-
Reserve Fund
A condominium reserve fund is defined as the money in savings the corporation has to use for replacement and non-routine repairs of common elements ex. roof, windows, boilers, carpets, garage. A portion of your maintenance fess will go towards the reserve fund.
-
HST
All new homes and condos are subject to HST. In the majority of cases, you’ll receive the HST rebate right away in the form of a discounted purchase price. Most condo and home developers already factor in the HST rebate into their price lists. If the property is sold within the first year, the buyer will be required to pay the HST rebate back in full. If the new home is leased in the first year, you may be required to pay the HST in full or you could still be eligible for the rebate by refiling for a New Residential Rental Property Rebate. It’s critical to take all the steps in claiming the new home as your principal residence, including changing your driver’s license address to avoid having to pay back the HST.
-
Assignment
An assignment is defined as the selling of the agreement of purchase and sale prior to title change or closing. Developers usually charge a fee to assign the unit. This typically happens with investors who want to get their initial investment and return back faster than waiting for closing.
-
Registration
Registration is defined as the process in which the building has passed all the city inspections and gone through all the processes to become a legal entity. Once registration has occurred, the buyer can obtain their mortgage.
-
Levies
Local governments charge the developer for the cost of infrastructure in the area to service the building. ex. art, schools, water, parks, and utilities due to the increase in the population. Levies are charged or passed to the buyer from the developer. Make sure to check with the developer what their fees would be and if they have a cap on those fees.
Have any more questions? Please feel free to contact me to see how I can help you reach your real estate goals.
Your Personal Market Guide
Find out how my specialized skill set gives you a market advantage, whether you’re buying or selling in Etobicoke or the West GTA.
