Things You Should Know About Closing Costs Before Investing in A Pre-Construction Condo
A lot of people these days opt to purchase a pre-construction condo for investment purposes. For all those and the others, it would be great to understand that Toronto is an excellent market to do so. There are various luxurious and attractive developments that have come up in the recent past, and many are still coming up. Therefore, the opportunities available are plenty.
However, the crucial thing to understand here is that searching for the right pre-construction condo is not the same task as searching for a condominium in resale.
So, what’s the difference? What are the things that you should keep in mind regarding the closing costs before you invest in a preconstruction condo? This article will help you through it all!
What do you mean by pre-construction condo closing costs?
When you purchase a pre-construction condo, there are certain extra fees involved as well. These fees are the additional fees that you have to pay for apart from your regular taxes, down payment, and mortgage. These additional fees are what we refer to as closing costs.
One cannot really determine the closing costs of a pre-construction condo with precision. This is because these costs have a lot of influence from different factors. These factors include area, size of the unit, number of bedrooms, etc.
It is advisable not to neglect the pre-construction condo closing costs. Think of investing in one only if you have a certain extra amount at hand to be able to pay for these closing costs.
What are the different types of pre-construction condo closing costs?
There are many different closing costs that can be there for a pre-construction condo. Also, there is no ideal way to determine the number of types of closing costs for a particular pre-construction condo.
However, there are certain factors that are common in most cases when deciding on the closing costs of a pre-construction condo. Here’s a list of few such parameters:
1. The Lawyer Fees
When it comes to purchasing a pre-construction condo for either settling or investment purposes, it is always a wiser choice to hire a reputable and knowledgeable lawyer fo assistance.
A lawyer having proper knowledge and experience will be able to understand the contract properly and guide you through it well. This will make sure that you don’t have to deal with any surprises later.
Now, the lawyer fees is a factor. However, the closing costs of a pre-construction condo will differ for different lawyers or situations.
2. Initial Setting Up Of The Utilities
Since it is a pre-construction condo, you will have to do the initial setup of all the utilities that are a necessity. This is a little pricey task. The most common utilities include power, water, and gas. Then, you will have to look for a satellite TV installation, and the WiFi connection too.
All these utilities might vary for different condos. However, certain ones are going to be there for initial settlement, and these impact the closing costs.
3. Paying Off The Land Transfer Tax
There are two types of taxes that the condo owner needs to pay in Toronto. These include municipal tax and provincial land transfer tax. The value of these taxes is dependent on a percentage of the total cost of the pre-construction condo.
Therefore, it is advisable to have a rough estimate beforehand itself as to how much the closing costs are going to be when it comes to taxes. Also, keep in mind that this aspect is going to cost much higher in comparison to other closing costs. It is going to be thousands of dollars.
4. Development Levies
This particular closing cost is dependent on the building/ tower and the developer for it. The main aspect of this cost is the fees that your developer acquires from the city for development so as to cater to the needs of new residents. That is the cost spent on taking care of amenities such as stores, community centres, and other infrastructure.
The impact of these costs is on all the owners of the pre-construction condo development and is divided equally. However, these closing costs also go as high as thousands of dollars. This is where the role of a good lawyer comes in too. Do not finalize on a pre-construction condo before looking into the amount of closing costs that you will have to pay.
5. The Tarion Warranty
Every pre-construction condo in Toronto comes with a Tarion warranty. This might be a fact that you are already aware of. However, are you aware of the fact that you will have to pay for this warranty yourself?
The amount that you will be paying as the Tarion warranty is a part of the pre-condo closing costs only. This amount is also a significant one. Get a proper estimate of this cost before you book any pre-construction condo.
6. Occupancy Fee Costs
Now, since it is a pre-construction condo, there are chances that you will have to pay the occupancy fees. These are the fees that are due if you shift into a building that is still in the construction or registration stage. This is the time when there is no need to pay for the mortgage. However, you will have to pay the developer these occupancy fees. These fees are also going to vary depending on a lot of factors.
These points clearly show that the closing costs of a pre-construction condo are also going to be quite high. Therefore, whether you are planning to buy a pre-construction condo for staying there or for investment purposes, look into these costs. You need to be prepared to pay these closing costs when you make a purchase.
Remember, real estate is a profitable market only if you are wise enough to make the right purchase. Therefore, look into all the closing costs properly and get an overall estimate before making any final decisions. It is advisable to seek help from an expert to help you with this properly. Buying a pre-construction condo is a crucial decision. Therefore, it must be taken wisely.
If you’re considering investing in a new condo, browse our now selling pre-con listings.