A pre-construction unit will likely be the largest financial commitment of your life, no matter if you intend to live in it or simply invest in it.
The buying process for a pre-construction unit includes two different closing stages, the Interim Occupancy phase and the Final Closing phase. Here you will discover how closing costs are incurred and what they are used for. This information will help you make a better decision when you purchase a pre-construction unit.
What You'll Learn:
What is Interim Occupancy?
In spite of being able to take possession of your unit, the entire project must be registered with the municipality before you can own it legally. Interim occupancy is the period in between. If you are in interim occupancy (often lasting from a few months to more than a year), you will be required to pay a monthly fee to your builder to cover three things: interest on the unpaid balance of your unit, estimated municipal taxes for your unit, and maintenance expenses.
During the Interim Occupancy Your Monthly Expense Will Be:
You will eventually pay these fees as part of your monthly carrying costs on the unit.
What's the difference between interim occupancy and final closing costs?
An interim closing is likely if you're buying a unit in the pre-construction phase. This is possible when the City has designated the property as safe to live in, but it has yet to be officially registered because the municipality hasn’t done a final inspection. Therefore, you are permitted to occupy your suite, however, the developer does not have the right to transfer the title to you.
This allows the developer to coordinate the move of hundreds of buyers. You can also expect some common areas or other units to remain unfinished while your suite is ready.
After the building is officially registered by the City and the buyer receives their "title," the sale of the property will be completed. After this, the buyer's attorney will contact them for payment of the final closing costs.
In most cases, the final closing involves a Statement of Adjustments that outlines the unit fees, title insurance, and land transfer tax. Upon payment of these fees, the buyer will receive their "title" to the unit and can begin paying their mortgage fees.
How much will closing costs be?
Below is a rough estimate of what you might pay at closing for a $650,000 pre-construction unit in Toronto, which is usually around 8 to 10% of the purchase price. NOTE: The actual fees will depend on your contract:
Land Transfer Taxes
When you go over $350k, the rate is more than 1%.
For example on a $600K condo in Toronto you are paying approx $17K in total land transfer taxes. On $800K condo would be approximately $25K in total land transfer taxes.
Between $5,000 - $25K+
As of 2021, expect to pay around $8-$10k for 1 bedrooms or studios, and around $12-18k for 2+ bedrooms.
Between $8,000 - $18,000+
Fees including everything usually will usually be somewhere between $1,500-$3,500.
Between $1,500 - $3,500
Utility Hook Ups
Sometimes you are charged one fee for all utilities that are hooked up, sometimes you are charged a separate fee for each of them.
Between $500 - $2,000 per utility hook up
Your new home comes with a warranty, but you have to pay for it. There is typically a $600-$1000 fee for most investment properties. Visit Tarion Warranty Enrolment Fees. for more information.
Between $600 - $1,000
Your total estimated closing costs can range between $15,600 - $49,500+
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