Buying pre-construction means signing to buy a home, usually a condo or a new house in a subdivision, before it is built. You lock in the price and spread the deposit over the build, but you take on risks a resale buyer doesn’t: construction delays, mortgage rates that can change before closing, interim occupancy fees, HST and rebate rules, and the chance of closing on a home worth less than you agreed to pay. This page covers the process, deposits, mortgage timing, interim occupancy, HST and Tarion coverage. It is part of our guide to property types in Canada; for a resale unit, see buying a condo in Canada.
How the pre-construction buying process works
| Stage | Timeline | What Happens |
|---|---|---|
| Purchase | Day 1 | Sign the Agreement of Purchase and Sale (APS), pay initial deposit |
| Deposit installments | Months 1–24 | Pay remaining deposits per the schedule (typically 15%–20% total) |
| Cooling-off period | 10 days (new Ontario condos) | You can cancel and get your deposits back (see below) |
| Construction | 2–5 years | Developer builds the project |
| Pre-delivery inspection (PDI) | Before occupancy | Walk through your unit and note deficiencies |
| Interim occupancy | Varies (condos) | Move in but don’t own yet; pay occupancy fees |
| Final closing | After registration | Title transfers, mortgage funds, you become the legal owner |
Ontario’s cooling-off period for new condos. A buyer of a new condo from the developer in Ontario can cancel by written notice that the developer (or its lawyer) receives within 10 days of the latest of getting the disclosure statement, the condominium guide and a copy of the signed agreement, and gets back all the money paid toward the price, with interest. Other provinces set their own rules for new-home purchases; your lawyer can confirm which apply to your agreement.
Deposit structure
| Payment | Timing | Typical Amount |
|---|---|---|
| Initial deposit | On signing | $5,000–$10,000 |
| First installment | 30 days | 5% of purchase price |
| Second installment | 90–180 days | 5% of purchase price |
| Third installment | 365 days | 5% of purchase price |
| Fourth installment (sometimes) | 540 days or on occupancy | 5% of purchase price |
| Total deposits | Over 12–24 months | 15%–20% of purchase price |
Example: $600,000 pre-construction condo
| Payment | Amount | Running Total |
|---|---|---|
| On signing | $5,000 | $5,000 |
| 30 days: 5% | $30,000 | $35,000 |
| 180 days: 5% | $30,000 | $65,000 |
| 365 days: 5% | $30,000 | $95,000 |
| Total (15.8%) | $95,000 |
In Ontario, a condo builder must hold your deposit in a trust account under the Condominium Act. If a deposit was not placed in trust and the builder fails, Tarion’s warranty protects up to $20,000 per condo unit. Freehold deposits are protected up to $60,000 (homes priced at $600,000 or less) or 10% of the price up to $100,000. (Source: Tarion.)
Mortgage considerations for pre-construction
| Factor | Details |
|---|---|
| When you need the mortgage | At final closing, not at signing |
| Rate lock | You can’t lock in a rate years in advance; you get the rate available at closing |
| Qualification | You must qualify at closing based on your income, credit, and debt at that time |
| Stress test | The stress test rules in force at closing apply |
| Interest rates | Could be higher or lower than today, a significant risk |
| Pre-approval | Get pre-approved before signing to confirm you can likely qualify, but this is not a guarantee |
The interest rate risk
The payments below are for a $500,000 mortgage over 25 years, with semi-annual compounding.
| Scenario | Today’s rate | Rate at closing (3 years later) | Monthly payment |
|---|---|---|---|
| Rates fall | 4.50% | 3.50% | $2,767 → $2,496 (saves $271/month) |
| Rates stable | 4.50% | 4.50% | $2,767 (no change) |
| Rates rise 1 point | 4.50% | 5.50% | $2,767 → $3,052 (+$285/month) |
| Rates rise 2 points | 4.50% | 6.50% | $2,767 → $3,349 (+$582/month) |
A 2-point rise on a $500,000 mortgage adds about $582 a month, or $34,905 in higher payments over a 5-year term. Rate risk is a central financial risk of buying pre-construction.
Interim occupancy (condos only)
In Ontario, you may move into your condo before the building is registered with the land titles office. During this period, you pay occupancy fees instead of mortgage payments.
| Component | What it covers |
|---|---|
| Interest | Interest on the unpaid balance of the purchase price, at the rate set in the agreement or under the Condominium Act |
| Property tax | An estimate of the unit’s monthly property tax |
| Common expenses | The projected monthly condo fees for the unit |
You do not build equity during interim occupancy. You are effectively renting your own unit from the developer until the building is registered, which can take several months or longer. Ask the builder for an estimate of the monthly occupancy fee before signing.
HST on pre-construction homes
In Ontario, the provincial part of the HST on a new home comes with a rebate of up to $24,000 if you buy it as your primary residence (or that of a relative). Builders usually include the rebate in the advertised price and claim it for you, so the price depends on your qualifying. The federal part of the GST/HST new housing rebate, and who qualifies for each part, are covered on that page.
For agreements signed from April 1, 2026 to March 31, 2027, Ontario’s temporary Enhanced New Housing Rebate raises the combined provincial rebate to as much as $80,000 on homes up to $1,000,000, phasing out by $1,850,000. (Source: CRA, Ontario Enhanced New Housing Rebate.)
| Situation | What happens with the rebate |
|---|---|
| You move in as your primary residence | The rebate applies; the builder usually credits it in the price |
| You buy to rent out | The owner-occupier rebate doesn’t apply, so the builder charges you the rebate amount at closing; you can apply to CRA for the new residential rental property rebate (Ontario up to $24,000) if you rent it under a lease of at least 1 year |
| You assign the contract before closing | HST applies to the assignment (below) and the rebate goes to whoever takes title |
The agreement of purchase and sale states whether the price includes HST and assumes the rebate is assigned to the builder. (Source: CRA, New Residential Rental Property Rebate.)
Assignment sales
An assignment sale lets you sell your purchase contract to another buyer before closing, usually with the developer’s consent, which can come with a fee set out in your agreement. Since May 7, 2022, GST/HST applies to assignments of new homes (CRA GI-120), and the profit is generally taxed as business income; our guide to assignment sales in Canada covers the steps, the tax on each side and the costs.
Tarion Warranty (Ontario)
Coverage
| Protection | Details |
|---|---|
| Deposit protection (condo) | Deposit held in trust under the Condominium Act; warranty backup up to $20,000 |
| Deposit protection (freehold) | Up to $60,000 if the price is $600,000 or less; 10% of the price (up to $100,000) above that |
| Delayed closing | Compensation if late |
| 1-year warranty | Defects in work/materials |
| 2-year warranty | Water penetration, electrical, etc. |
| 7-year warranty | Major structural defects |
Limitations
| Limit | Amount |
|---|---|
| Deposit protection max (condo, backup to the trust account) | $20,000 |
| Deposit protection max (freehold) | $60,000 to $100,000, tiered by price |
| Additional protection | Some extended warranties available |
| Not covered | Market value changes |
Risks of buying pre-construction
| Risk | Details | Mitigation |
|---|---|---|
| Construction delays | Completion can slip well past the first estimated date | Budget for delays; check the delayed-closing terms and Tarion’s delay compensation |
| Interest rate changes | Rates could be significantly higher at closing | Stress-test your budget at higher rates before signing |
| Financial situation changes | Job loss, income change, or new debts before closing | The lender rechecks income, credit and debts at closing |
| Unit differs from model | Final unit may have different finishes, views, or layout | Review the APS carefully; the model suite is not a guarantee |
| Developer bankruptcy | Rare but serious; deposit protection has limits | Research the developer’s track record; in Ontario, condo deposits must be held in trust and Tarion adds limited backup protection |
| Market decline | Property could be worth less at closing than you paid | Plan to hold long term rather than relying on quick appreciation |
| Condo fees rising | First-year condo fees are based on the builder’s estimated budget and often rise once the condo corporation sets its own | Read the disclosure statement’s budget; how condo fees change over time |
| Deficiencies | Quality issues discovered at PDI or after move-in | Document everything at the PDI; Tarion’s 1-, 2- and 7-year warranties cover defects, systems and major structural defects |
Pre-construction buyer checklist
- Research the developer (track record, past projects, financial stability)
- Hire a real estate lawyer experienced with pre-construction
- Read the entire APS, especially the clauses on delays, assignment and HST
- Understand the deposit schedule and ensure you can meet each payment
- Get pre-approved for a mortgage (understanding it’s not a guarantee for closing)
- Test your budget at higher interest rates than today’s
- Budget for interim occupancy fees (condos)
- Confirm whether HST is included, whether the price assumes the new housing rebate, and what happens if you rent the unit out
- Review TARION warranty coverage (Ontario)
- Attend the pre-delivery inspection and document all deficiencies
Related pages
Sources
The figures and rules on this page come from these sources, last checked against them between September 25, 2026 and September 29, 2026. How we check facts.
- Canada Revenue Agency: GST/HST: What is the Ontario ENHR
- Ontario e-Laws: Condominium Act, 1998
- Tarion: How does deposit protection work on new homes? | Tarion.com