What Do You Need To Close On a Preconstruction? (Closing Costs)

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What Do You Need To Close On a Preconstruction
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When you are buying a pre construction home in Toronto, there are many things that you need to be aware of. For example, you need to know the closing costs that you need to pay at the end.

In fact, even if the development is finished within 3-4 years, you should still know these costs.

Now the question is, what do you need to close on a preconstruction?

Let’s take a look at the closing costs for the building. The closing costs include Land Transfer Tax, Levies, HST, Reserve Fund, Tarion Warranty, etc.

However, for more information, it is a great idea to take a look at detailed information in the online Toronto real estate market as well.

Land Transfer Tax

One of the important items to close on a pre-construction Toronto property is Land Transfer Tax. Land Transfer Tax is the amount of money you must pay for the final registration of a pre-construction condo in Toronto.

Now, you are definitely asking how much is that?

Let me give you an example. If you consider 700,000 for a condo, the land transfer taxi would be $10,475 in Ontario. However, when you are thinking about Toronto, specifically, the tax will be doubled, which is around $20,950. You might be wondering if there are savings for first-time buyers? The answer is yes. You will need to pay $6,475 in Ontario and $12,475 in Toronto.

Levies

Another important payment for closing a preconstruction is levies.

Levies are related to development taxes or charges from the municipality charged to the developer, including Education Levies, Public Art Levies, Parks Levies, etc.

Most Toronto condo developments offer capped levies, which means that if your levies are capped at $6000, the developer cannot charge you more than that in the final closing.

However, you need to know that development charges are subject to HST. Therefore, you need to pay more.

HST

Do you have to pay HST? Well, it depends! Most Toronto condo developers include HST in their unit price.

Also, it depends on your purpose, whether you are an investor or a buyer who wants to move in after the purchase.

The amount of money you should pay for HST depends on the price of your home. If it is less than 350,000$, expect to pay 7.8% in HST.

However, if the purchase price is more than 450k, expect to pay a flat fee of $24,000.

Also, you need to know that your money is not gone forever! You can get this money back from the CRA, and in most cases, you will get all or the majority of the money.

Legal fees

You should also consider legal fees so that you need to employ an expert lawyer. Whether they charge $500 or $1500, you should just consider these costs.

Tarion Warranty 

You need to include the Tarion Warranty program as an important payment to close on a pre construction, and you should pay the enrollment fee.

What is Tarion Warranty? The major purpose of this program is to protect customers of new homes by making sure that builders obey rules and provincial legislation.

The fee for Tarion Warranty will cost you between $1000-$1800 depending on the unit price.

Utility Connection

For a new home, residents need to have utility pipes, lines, and meters hooked up in advance so that it becomes ready for you to move in. generally, you can expect to pay around $500-2000 for utility hookups.

Reserve Fund

The reserve fund goes into the condo corporation’s bank account.

Why is that? For future repairs in the building.

For a pre construction condo, you need to provide two months of condo fees to contribute to the condo’s reserve fund.

What Do You Need To Close On a Preconstruction

Conclusion

There are other costs that you need to pay instead of the unit itself when it comes to pre-construction Toronto condos.

It can be said that all miscellaneous costs together, including Reserve Fund, Utility Connection, Tarion Warranty, and other costs that may emerge, will cost around $4000-$5000.

However, the best idea is to connect a top ranked Toronto real estate agent so that they will help you to have more accurate numbers for the costs.

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