The thought of buying a brand-new home is exciting! There are some things to consider before you make the decision to purchase new or pre construction properties.
Understanding the payment schedules. Usually with preconstruction, the builder will have a set amount of a down payment required for your sale, this percentage can vary but 20% is a common amount. This is typically due in a set of installments. Installments can vary but a typical schedule may be 5% within 30 days of the purchase, 5% within 90 days, 5% within a year and the final 5% due 30 days before move in. Being very clear on what is required of you and when is pivotal.
GST – If this is a new home, you will also need to factor in GST. Currently GST is 5% in BC and this amount can not be rolled into your mortgaged total, meaning you will need to make sure that you have enough in your down payment to cover this amount. Upgrades – It’s nice to know your house will be move-in ready. However, be prepared for the very strong possibility that the included options for your finishes will be limited, and the cost for upgrades can be significant. Offering upgraded finishes is very common and can be enticing, so make sure you do your research on the quality and value of the upgrades being offered. Legal Fees – Pre-construction purchase and sale agreements are lengthy and detailed, it is important to get an experienced lawyer who knows what to look out for and can help you negotiate on terms in your favour.
Your mortgage may be different. Since you cannot really qualify for a mortgage until the house is ready to move in, when you commit to buy, you are also gambling on what the mortgage rates will be in the future, as opposed to what you would qualify for if you moved in within the typical 30 or 60 days. It is important to speak with a mortgage professional who can set you up with a plan that will review the rates and lock in for the longest periods of time possible. Be prepared that you may need to review and re-lock in many times during the construction process. Prepare for delays. Buying a pre-construction home has a lot of benefits, but it can be very frustrating too. Going into the process with an understanding that dates may change and it may be entirely out of your control, will help make the process be as less stressful as possible.