Buying pre-con: important dates to know

February 26th, 2019 - by Admin

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How much time do you have to set aside to get through all the stages of a pre-construction condo building?

For starters, you'll have to select a pre-construction project, sign up, put money down, and wait out the construction phases. 

In this post, we’re going to go over some timelines you can expect if you’re in the market for a pre-construction condo unit. Fundamentally, these types of investments are going to require some long-term planning and patience.

Where to start

Once you’ve decided pre-construction is for you, you have to begin the search and lock down a location already in (or about to start) development. To get going, you need to decide on what you're looking for. 

This means selecting ideal locations, unit sizes, and amenities while understanding what intentions you have for the unit. The unit you want for yourself or your family can differ greatly from the unit you’d want for a tenant, or one you'd like for resale value.

Narrow down your search starting with location, so you can see what’s being offered in each neighbourhood.

Use online resources

The great thing about the internet is that you can search through multiple developments without having to leave your home.

Finding websites with a variety of housing listings is great if you have no investment preference. If you’re looking for a specific type of housing option, like a pre-construction condo, you’re going to want to find resources that display all pre-construction options in one place.

Reach out

If you’re noticing a few places of interest, reach out to the sales agent and ask about next steps. In a pre-construction building, there aren’t units to see, so you will probably have to rely on building renderings and preliminary designs.

Signing up for information from a development site helps you keep up to date on pricing, timelines, units on offer and more in real time.

Getting these details from a select number of projects on an ongoing basis will help you narrow down what works for you and what doesn’t.

Length of construction

Each pre-construction project is likely to be in a different stage of development. One could be gathering funds to break ground, while another could already be in the dirt, digging out a foundation. Therefore, one project might finish faster than the next.

There are different periods of occupancy, where certain floors are allowed into their units at different times. Knowing your intended occupancy dates can help you select a unit in this capacity. Sometimes people on the higher floors can move in 6 to 12 months after those on the lower levels. Make sure to discuss these occupancy options with your sales agent.

If your project hasn’t broken ground, the construction phases can last three to four years.

Mortgage pre-approval

When you get mortgage pre-approval, you’re able to understand how much you can afford to borrow for an upcoming housing purchase. It doesn’t mean you’ve accepted the loan or have to go through with anything, but pre-approval shows that you’re serious about a housing purchase, both to yourself and the builder.

Keep in mind that your mortgage pre-approval will only last two to three months. Once the pre-approval has expired, you’ll have to get re-assessed for another one.

Down payment

Mortgages won’t cover the entire cost of your home purchase, and frankly, they shouldn’t. No one should be purchasing an entire home using debt. Down payments will reduce how much debt you have to pay back to your mortgage provider, so the larger deposit, the better.

Pre-construction units afford buyers an easier down payment schedule, at 5% intervals rather than the lump sum down payments you’ll find with resale homes and condominiums (usually 10% to 20% at once).

Cooling period

Legally, pre-construction builders have to give buyers 10 days to “cool off”. During those 10 days, buyers can decide to cancel the purchase if they have a sudden change of heart, and you don’t have to explain yourself!

If you’ve found a better unit or just don’t want to go through with it, you can walk away with a full refund of your deposit.

Payment schedule

As the development builds up, you’ll have to start paying for your unit. This usually equates to 20% to 25% of the purchase price, spread out over 12 to 18 months. Funding the purchase over time can make pre-construction units more accessible to certain buyers.

Below is a typical payment schedule, although each project will be different.

  • 5% within 30 days of purchase
  • 5% 4-6 months after purchase
  • 5% 8-12 months after purchase
  • 5% after 540 days or on date of occupancy (whichever is earlier)

Closing date

The closing date for a pre-construction unit will be different than it is for a resale home. Normally, when a purchase closes you get the keys and ownership of the property. With pre-construction, you retain ownership once you make your first payment. After this effective closing, you’re able to assign (sell) your ownership to another buyer.

Occupancy

Your occupancy date is when you’ve been given the keys and are allowed to move in. You may be required to make a final down payment before you’re given the go-ahead.