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There is no doubt that pre-construction homes have a certain appeal to homebuyers. Pre-construction homes are typically cheaper than their resale or ready-built counterparts, because you’re essentially buying a promise. You put down your deposits (as per your purchase agreement) and the builder promises to deliver a home in a few years. Beyond price, another benefit to buying brand new is that no one else has ever lived in the home. And because the home hasn’t been built yet, you’ll have the opportunity to customize it to your preferences. But you have to ask yourself if all of these things are maybe a little too good to be true when buying a home. If pre-construction is something you’ve been considering, here’s the 411 to help you decide if it really is for you.

What is a Pre-construction Home?

A pre-construction home is a house you buy before it is constructed. You have your choice of homes, including:

High-rise condos

Low-rise condos

Detached houses

Semi-detached houses


For a condo development, you’ll be buying a home off of blueprints or a 3D computer rendering that provides a simulated walk through. For houses, you’re usually able to visit a model home that sits on the lot of the future development. Although model homes tend to be extremely aspirational in their decor, this is a better way to get a more realistic look at what you’ll be buying.

The Benefits of Pre-construction Homes

So, what’s the big attraction of the pre-construction home? There are quite a few benefits, including:


The warranty programs in Canada offer protection for new build homes, including things such as delays in occupancy and closing coverage, protection for your deposit, and the cost of repairs should there be issues in the construction of your home once you move in.


While your home is being built, it is almost guaranteed to rise in value.

No Bidding Wars

Depending on where you’re shopping for your home, bidding wars can really knock up the price. When inventory is low, buyers are desperate, and the more attractive the home and neighbourhood, the more chance there is you could end up paying an inflated price for a resale home. When it comes to pre-construction, you’re looking at a set price. You’ll know exactly how much you’ll be paying, usually at fair market value.

Designer Home

You have the option of designing your home with plenty of upgrades available. You’ve not only got upgrades for things such as kitchen counters and flooring but can also often make structural upgrades including adjusting some floor plan options. Because you’re making all your decisions for changes during the building process, they are far more affordable than a reno or upgrade once you move in. You can make smart decisions that will increase the resale value of your home.

Lower Condo Fees

When buying pre-construction condos, the condo fees are lower in new builds than resale condos. That is because everything is new, and the management has yet to see how much it costs to operate the building or property.

Flexible Deposits and Down Payments

Although you tend to need more for a deposit or down payment for pre-construction, the payment is staggered. You have time to keep saving as there is a small amount paid up front, and then the rest is paid on a schedule that leads up to the final closing.

Better Choices

You’ll have more choices when buying pre-construction compared to resale condos such as the floor of the unit and the location (i.e., a corner unit or a better view).

10-Day Cooling Off Period

You’ll have 10 days to “cool off” and reconsider your purchase. During this time, you can arrange for financing and also have a lawyer review the agreement. Should you change your mind or find something in the agreement you don’t like, you can get your full deposit back and walk away.

The Downside to Pre-construction Homes

As with everything, you have to take the bad with the good. Some downsides to pre-construction include:


You should always go into pre-construction with a hint of pessimism. However, with delays, you can be looking at years, not weeks or months. In general, low-rise pre-construction homes tend to see fewer delays than high-rise condos. Researching developers will help you find a trusted company with a good reputation for customer satisfaction.

Increased Condo Fees

Although you’ll see lower condo costs going in, you have to prepare yourself to see an increase by as much as 10% to 20% within two years. That is because within two years, the cost of running the condo is realized and increases are always required. This has to be added into your monthly budget when determining if you can afford your new condo, or you might find yourself having trouble making ends meet.

Higher Deposits

While you do get the opportunity to stagger your deposit payments, you will be paying as much as 10 to 20 per cent overall, compared to a deposit of five per cent when signing a resale agreement. In most cases, you’re looking at a five-per-cent sales deposit up front, and then payments that can be set at four, nine and 18 months, depending on the developer or building schedule.

Mortgage Challenges

When buying a resale home, you’ll usually be making your purchase before your locked-in rate expires. However, this can prove to be a challenge for pre-construction homes if the home completion date is extended and passes your locked-in expiry date.

Occupancy Fees

In the case of a pre-construction condo, there is a registration process required before you can legally own your unit. Although you can move into your condo during this period, you’ll be charged a monthly “occupancy fee,” which does not go towards your mortgage. This monthly fee will include your condo fees, the interest portion of the balance owing on the purchase price, and a portion of your property taxes.

Other Pre-construction Costs

Your pre-construction home also has additional fees including GST/HST. There are rebates available if the home is your primary residence depending on your province. If you intend to rent out your unit, you’ll be faced with some taxes that you won’t be too thrilled about. A good way to avoid these taxes is to live in your unit for a while before renting it out.

There are also closing costs that you don’t have when buying a resale home, such as charges for utility meter installations, fees to track your deposit payments, use of the electronic land registration system, and more.

These additional fees can add up to as much as three per cent on top of your purchase price. Working with a real estate agent and lawyer will help you get a more realistic view of what further costs you’ll have to pay on your pre-construction home. A real estate agent can also help you look at a variety of resale and pre-construction options so that you are certain to find your dream home.

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