How does buying pre-construction work in Canada?

You sign a purchase agreement and put down a series of deposits (typically 15%–20% of the purchase price) spread over 1–2 years. Construction takes 2–5 years. You do not need a mortgage until closing — which happens when the building is complete and registered. Your mortgage rate, terms, and qualification are determined at that future closing date, not when you sign.

How much deposit do I need for pre-construction?

Typical deposit structures are 15%–20% of the purchase price, paid in installments over 12–24 months. A common structure is: $5,000 on signing, 5% in 30 days, 5% in 90–180 days, 5% in 365 days, and sometimes an additional 5% later. The deposits are held in trust by the developer lawyer until closing.

Do I need a mortgage to buy pre-construction?

Not immediately. You need cash or savings for the deposit installments (15%–20%). The mortgage is only required at closing, which may be 2–5 years after you sign. This means your mortgage qualification, credit score, and rates at that future date will determine your mortgage — not your current situation.

What is an assignment sale?

An assignment sale is when you sell your right to purchase the pre-construction unit to another buyer before closing. You are not selling the property (it does not exist yet) — you are selling the purchase agreement. The new buyer assumes your contract and closes with the developer. Assignment sales may be restricted or require developer consent.

Is HST included in the pre-construction price?

It depends. For condos in Ontario, HST is typically included in the purchase price, and the builder claims the HST new housing rebate on your behalf. For houses and townhomes, HST may or may not be included — always confirm. If the rebate conditions are not met (e.g., you do not move in as your primary residence), you may owe $24,000+ in HST.

What are the risks of buying pre-construction?

Major risks include: construction delays (2–3+ years is common), the final unit may differ from the model suite, your financial situation may change before closing, interest rates may be higher at closing, the developer may go bankrupt, occupancy fees before registration can be expensive, and the market value at closing may be lower than your purchase price.

Buying Pre-Construction in Canada: How It Works, Risks & Mortgage Guide

Updated April 2026

Buying pre-construction can be a way to get into the market at today’s prices and spread your down payment over time. But it comes with unique risks that resale buyers don’t face — construction delays, changing mortgage rates, occupancy fees, HST surprises, and the possibility of closing on a unit worth less than you paid. Here’s everything you need to know.

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 (Ontario condos)	You can cancel without penalty during this period
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

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	—

Deposits are held in trust by the developer’s lawyer. If the developer goes bankrupt, TARION (in Ontario) protects deposits up to $20,000 per unit.

Mortgage considerations for pre-construction

Factor	Details
When you need the mortgage	At final closing, not at signing
Rate lock	You cannot 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 rate at closing applies
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

Scenario	Today’s Rate	Rate at Closing (3 years later)	Monthly Payment ($500K mortgage)
Rates fall	4.50%	3.50%	$2,495 → $2,245 (saves $250/month)
Rates stable	4.50%	4.50%	$2,495 (no change)
Rates rise 1%	4.50%	5.50%	$2,495 → $2,763 (+$268/month)
Rates rise 2%	4.50%	6.50%	$2,495 → $3,044 (+$549/month)

A 2% rate increase on a $500,000 mortgage adds $549/month — or $32,940 over a 5-year term. This is the single biggest 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	Approximate Monthly Amount
Interest on the balance owing	Varies (based on purchase price minus deposits)
Estimated property tax	~$200–$400/month
Estimated maintenance/condo fees	~$300–$600/month
Total occupancy fees	$1,500–$3,500/month

You do not build equity during interim occupancy. You are essentially renting your own unit from the developer while the building completes registration. This period can last 3–18+ months.

HST on pre-construction homes

Property Type	HST Included in Price?	HST New Housing Rebate
Condo (Ontario)	Usually yes (builder includes and claims rebate)	Up to $24,000 (if primary residence)
Detached house (Ontario)	Sometimes — always confirm	Up to $24,000 (if primary residence)
Investment unit (not primary residence)	Builder usually includes HST	You must repay the rebate ($24,000+)
Townhouse	Varies by builder	Confirm in writing

HST rebate clawback risk

If the builder claimed the HST new housing rebate on your behalf but you do not move in as your primary residence (e.g., you rent it out immediately), the CRA will require you to repay the rebate — up to $24,000 in Ontario.

Scenario	HST Rebate
You move in as primary residence	Rebate applies — no issue
You rent it out from day one	Must repay rebate to CRA ($24,000+)
You assign the contract before closing	May have tax implications — consult an accountant

Assignment sales

Factor	Details
What it is	Selling your purchase contract to a new buyer before closing
When it happens	During the construction/pre-closing period
Developer consent	Usually required — check your APS
Assignment fee	$3,000–$10,000+ (charged by the developer)
Profit	Difference between your purchase price and the assignment price
Tax	Assignment profits are fully taxable — may be treated as income (not capital gains)
HST on assignment	May be applicable — consult a tax accountant

→ See: House Flipping Taxes in Canada

Risks of buying pre-construction

Risk	Details	Mitigation
Construction delays	1–3+ years beyond the estimated completion date	Budget for delays; don’t rely on a specific move-in date
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	Maintain stable employment and avoid new debt
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 devastating — deposit protection is limited	Research the developer’s track record; TARION protects up to $20,000 in Ontario
Market decline	Property could be worth less at closing than you paid	Have a long-term plan — don’t rely on immediate appreciation
Capping of condo fees	Developers set initial condo fees low; they rise significantly after the first year	Budget for 30%–50% fee increases after the first year
Deficiencies	Quality issues discovered at PDI or after move-in	Document everything at PDI; TARION warranty covers 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)
Stress-test your budget at 2%+ higher interest rates
Budget for interim occupancy fees (condos)
Confirm whether HST is included and under what conditions
Review TARION warranty coverage (Ontario)
Attend the pre-delivery inspection and document all deficiencies