Are you considering purchasing a pre-construction home in the GTA? While buying a pre-construction home is very appealing for many reasons, there are also some things you need to consider before locking into an agreement. That’s why our experts at Soni Chachad Real Estate have compiled a list of 5 pros and cons of buying a pre-construction home, along with a bonus look at a few pre-construction properties we have available for you today!
PROS
1. Customization Options
Arguably one of the best parts of buying a pre-construction house is there will typically be customization options available to make your home unique to you. Although some builders will follow a standard plan, buyers can usually customize at least a few things inside the home. Some examples of customizable options include paint colours, flooring, countertops, and tiles. When it comes to customization, it’s important to know who you’re working with – does your builder specialize in custom homes, or do they follow a standard construction procedure?
2. Time to Save for a Down Payment
Another thing that many buyers find advantageous is they have time to save for a down payment. With pre-construction, you’re paying the down payment over the course of the construction, typically in 5% payments rather than in one lump sum. Most projects will require a down payment of 20%, but the benefit is that the deposit structure will be spread out over 3-4 years, making it attractive to buyers who may not have the full down payment amount upfront.
3. Buying Early Means Appreciation Potential
Something else to consider is that buying early means there is the potential for appreciation over time. Although there is no guarantee, if house prices rise between the time you sign the sales agreement and the time your home is complete, you could be moving into a home with a significantly higher market value than the price you paid.
4. No Bidding Wars
If you’ve ever purchased a resale home in a hot market, you know the stress a bidding war can put on a transaction. Thankfully, with pre-construction homes, there are no bidding wars – you know the price ahead of time, and there is either a unit available for you or not. This is a welcome relief for many who are tired of fighting other buyers to purchase a home, resulting in a much calmer buying experience.
5. Low Maintenance Fees (to Start) & Warranty
Finally, when moving into a pre-construction home, everything should be in tip-top shape, meaning you’ll enjoy low maintenance fees (to start) and a warranty. If anything happens to your new house, which the likelihood is low but not zero, it should be covered under warranty; however, you do need to be aware that your maintenance fees will likely rise over time. For example, most condo projects in the GTA have seen maintenance fees increase by about 10-30% over a period of 2-3 years.
CONS
1. Higher Down Payment Than Resale
As you may have realized by reading the ‘pros,’ pre-construction homes require a higher down payment amount than resale homes. Yes, it’s spread out over time, but it’s still typically 20%, whereas resale homes can have down payments as low as 5% (as long as the purchase price is under $1M). With pre-construction homes, the down payment amount is set by the developer and isn’t always going to be accessible for buyers, especially first-time home buyers.
2. Potential Delays
When you purchase a pre-construction home, you must be prepared to face potential delays. Although no one wants to wait extra time to get into their dream home, the builder cannot sign off on the home and allow you to move in until it’s finished. If they run into any issues with things like permits or hookups, you could be forced to wait past the original completion date.
3. Paying HST
One thing that buyers often don’t realize is that with pre-construction homes in the GTA, you will be paying HST on top of the regular GST. There is already a GST/HST rebate included in the purchase price of a home when you buy directly from a builder, so you need to be mindful to factor that in financially when saving for a pre-construction home.
4. Imbalanced Risk
Though there is risk in any investment, it’s important to note that there is an imbalanced risk between you and the developer in pre-construction. While you risk forfeiting your deposit should you not be able to cover the mortgage at closing (as well as potentially facing further legal action from the developer for damages), if the developer fails to complete the project for whatever reason, they simply return your deposit, and that’s it. Thankfully, many GTA developers are backed by major banks and lenders, but this is still an important aspect to consider when purchasing a pre-construction home.
5. Interest Rates & Financing
A final ‘con’ you need to be aware of is that nobody can (100% accurately) predict where interest rates will be in 2-3 years from now. While your pre-approval may be valid today, if rates go up, you lose your job, or the property market value decreases drastically, you could be facing a larger down payment – or worse, a pre-approval that’s no longer valid. So, how do you avoid this? Do your best to prepare financially and ensure your budget can handle a rise in interest rates.
Bonus: Pre-Construction Homes from Soni Chachad Real Estate
Did you know that Soni Chachad Real Estate has several pre-construction homes that are currently available?! Here’s a brief look at them!
The Red Hill Semis
?? 29 Dana Drive, Hamilton
?? 769 Knox Avenue, Hamilton
Starting at $849,900, these 1424 square-foot semi-detached properties will be ready for closing in early 2025. Here are some unit features you need to know about!
?? 3 Bedroom
?? 2 Bathroom
?? Single Garage
?? Master with Ensuite
?? Unfinished Basement
?? Specialty Add-Ons Available
Bedroom 1 (Master) – 16’x11’
Bedroom 2 – 7’11”x16’
Bedroom 3 – 7’9”x13’
*Flexible closing and deposit options available*
The Macassa Towns
?? 420 Red Oak Avenue, Stoney Creek
Starting at $889,900, these townhouses range in size from 1544 square feet to 1607 square feet (depending on if you opt for an interior or exterior unit) and will be ready for closing in mid-2025. Here are some unit features you need to know about!
?? 3 Bedroom
?? 2.5 Bathroom
?? Single Garage
?? Master with Ensuite
?? Upper-Level Laundry
?? Middle Unit with Sun Tunnel
Bedroom 1 – 9’3”x11’
Bedroom 2 – 9’3”x11’
Bedroom 3 (Master) – 10’5”x12’
*Flexible closing and deposit options available*
Bringing it All Together
If you decide pre-construction is best for you, it’s important to consider all the pros and cons to make an informed decision. Although you will likely have customizable options available to you with a pre-construction home, you need to be ready to potentially face unexpected delays that could set your move-in date back. On the one hand, you’ll have more time to save for your down payment, while on the other, it will be much more than what’s normally required for a resale home. With a pre-construction home, you don’t have to worry about bidding wars, but you do have to worry about HST. And that’s not to mention the imbalanced risk between you as the buyer and the developer. While you will enjoy low maintenance fees and warranty since you’re moving into a new home, you need to be prepared for the maintenance fees to increase over time. And finally, you must also consider that the market can change rapidly over the course of construction, and you need to take steps to ensure your financing will still work even throughout market fluctuations. Ultimately, depending on your situation, buying a pre-construction home could be a great option – you get a brand-new home in a prime location for a locked-in price – but it’s always important to consider both sides of the coin when it comes to your next real estate transaction.
If you’d like further information about our available pre-construction homes or if you’re searching for an experienced, reputable realtor in the GTA to represent you as a buyer or seller in your next home transaction, be sure to check out my featured listings and do not hesitate to reach out to me directly!