Budgeting for a pre-construction home.
By on Nov 13, 2024
With the recent drop in interest rates, we are likely to see more homebuyers shopping for a brand new home. While it’s exciting planning for your big purchase, it’s important to remember there are other costs besides your deposit and your mortgage that you should anticipate.
It helps to know that in Ontario, new homes come with a builder’s warranty that’s supported by Tarion, a consumer protection organization established by the provincial government. As the most comprehensive warranties in Canada, it provides coverage as soon as you sign your purchase agreement, right up to seven years after your home is completed.
The warranty exists to help homebuyers feel confident in their purchase, but it’s still important to be an informed new home buyer.
When crunching the numbers for your new home purchase, here are three costs to include in your budget - and a potential risk to prepare for, just in case.
Costs to budget for
1) Legal Fees
A home is likely one of the biggest purchases you will ever make – so why wouldn’t you check with an expert before signing? Invest in a consultation with a real estate or condo lawyer so they can review your purchase agreement with you. Why? The purchase agreement is a legal contract between the builder and the homebuyer, and it determines what’s included in the price of your home. The agreement also includes important information in the rare instance that the sale may be delayed or terminated.
2) Closing Costs
When the sale is finalized, homebuyers should expect to pay some one-time expenses such as taxes, inspection and appraisal fees, and legal fees for registering the transfer of property, getting title insurance and preparing mortgage documents – and can range from 1.5% to 4% of the purchase price. Land transfer taxes apply in the province of Ontario and for City of Toronto residents, with rebates available for first-time homebuyers.
3) Moving, Storage or Accommodation Costs
It costs money to move – whether you hire professional movers or not – so you need to plan for that. If there’s a delay in the delivery of your new home however, there may also be extra storage, accommodation or other costs. The builder’s warranty includes coverage for up to $7,500 in compensation in case of improper delays, within specific limits set out in the Addendum of your purchase agreement. This includes $150 per day to cover meals and accommodations and additional amounts for moving and storage costs, up to the limit of $7,500.
Your Deposit is Covered by the Builder’s Warranty
In the rare event that your builder can’t deliver your new home, they are required to return your deposit. However, you can have confidence that if they don’t, you can submit a claim to Tarion for compensation up to $100,000. This coverage applies if you exercise a right to terminate your purchase agreement, or in the case that a builder goes into bankruptcy or breaches your agreement. Visit Tarion.com to find out more about deposit protection.
Be Prepared - Register Your Agreement With Tarion
As a not-for-profit consumer protection organization, Tarion is here to support you with information about your builder’s coverage and guidance when making a warranty claim.
When you buy your new home, create a record of your purchase by registering your purchase agreement with Tarion.
This allows Tarion to provide you with key details about the warranty program while you wait for the keys to your new home. It also allows Tarion to take action with the Home Construction Regulatory Authority (HCRA) in case a builder is selling homes illegally. You can register at Tarion.com.
