Pre-Construction Closing Costs: What to Expect

Closing costs for pre-construction properties can be significantly higher than resale properties. This guide explains what to expect.

Additional Costs Not in Resale

• Development charges: Municipal infrastructure fees
• Education levies: School board charges
• Parkland dedication: Municipal park funding
• Building permit fees: Municipal building costs
• Utility connection charges: Water, gas, electrical connections
• Builder's legal fees: You pay the builder's lawyer
• Tarion enrolment fee: Warranty program (Ontario)
• Metrolinx levies: Regional transit (GTA)

Development Charges (Largest Cost)

• Range: $8,000-$25,000+ per unit
• Varies by municipality
• Check if capped in your agreement (important!)
• Some developers cap DCs; others pass through actual costs

Other Municipal Levies

• Education levies: $1,000-$3,000
• Parkland dedication: $500-$2,000
• Building permit fees: $500-$1,500
• Art levy (Montreal): $500-$1,500

Utility Connection Charges

• Water meter: $300-$500
• Electrical connection: $500-$1,500
• Gas connection: $300-$800
• Hot water tank rental: $20-$30/month

Legal and Administrative

• Builder's legal fees: $800-$1,500
• Title insurance: $200-$400
• Land transfer tax: Same as resale
• Your legal fees: $1,000-$2,000
• Statement of Adjustments: Part of legal fees

Tarion/Warranty Fees

• Tarion enrolment fee (Ontario): $600-$1,500
• New Home Warranty (BC): $500-$2,000
• New Home Warranty (Alberta): $1,000-$2,500

Other Costs

• Property tax adjustment: Prorated from registration date
• Condo fee adjustment: First month's fees
• Utility meter deposits: $200-$500
• Appliance delivery/installation: If not included

Rule of Thumb

• Budget 3-5% of purchase price for closing costs
• Example: $500,000 unit = $15,000-$25,000
• Some agreements may result in higher costs

Example Breakdown ($500,000 Unit in Ontario)

Development charges: $15,000
Education levies: $1,500
Parkland dedication: $1,000
Building permit fees: $800
Utility connections: $1,200
Builder's legal fees: $1,000
Land transfer tax: $6,475 (first-time buyer: $2,475 after rebate)
Your legal fees: $1,500
Title insurance: $300
Tarion enrolment: $900
Property tax adjustment: $1,000
Total: $31,675 (6.3% of purchase price)

Use our Closing Cost Calculator for estimates.

1. Cap Development Charges

• Negotiate a cap on development charges in the agreement
• Some developers offer caps ($10,000-$15,000)
• Without a cap, you pay actual costs (can be $20,000+)

2. Review the Agreement Carefully

• Understand all adjustments and charges
• Know what's included and what's extra
• Have a real estate lawyer review

3. Budget for Closing Costs

• Save 4-5% of purchase price
• Start saving during construction (2-4 years)
• Don't use deposit money for closing costs

4. Ask About Caps and Inclusions

• Are development charges capped?
• Are any utilities included?
• What upgrades are included?
• Are appliances included?

What Are Occupancy Fees?

• Monthly payments between occupancy and final closing
• You don't own the unit yet (title hasn't transferred)
• Similar to rent but calculated differently

Occupancy Fee Components

1. Interest on unpaid balance: Interest on purchase price minus deposits
2. Estimated property taxes: Prorated annual amount
3. Estimated condo fees: Based on budget

Example Calculation

Purchase price: $500,000
Deposits paid: $100,000 (20%)
Unpaid balance: $400,000
Interest rate (prime + 2%): ~7%
Monthly interest: $400,000 x 7% / 12 = $2,333
Property tax: $300/month
Condo fees: $300/month
Total occupancy fee: $2,933/month

Duration

• Typically 6-18 months
• Until building registration completes
• You pay occupancy fees until final closing

Move-In Costs

• Moving company: $500-$2,000
• Cleaning: $200-$500
• Painting: $500-$2,000
• Window coverings: $500-$3,000
• Furniture: $2,000-$10,000+

Ongoing Monthly Costs

• Mortgage payment: Use our Mortgage Calculator
• Condo fees: Check agreement for estimate
• Property tax: Based on assessed value
• Utilities: Electricity, water, gas, internet
• Insurance: Condo owner's insurance

Ontario (GTA)

• Highest closing costs (development charges)
• Metrolinx levies apply
• Tarion warranty fees
• First-time buyer LTT rebate up to $4,000

British Columbia

• Lower development charges than Ontario
• Property Transfer Tax (first-time buyer exemption under thresholds)
• New Home Warranty fees

Alberta

• Lowest closing costs (no land transfer tax)
• Small registration fee
• New Home Warranty fees

Pre-construction closing costs are significantly higher than resale. Budget 4-5% of purchase price, understand development charges, and review your agreement carefully. For financial planning, use our Calculators: Closing Cost Calculator, Mortgage Calculator. The AI Advisor can answer closing cost questions.

This guide is for educational purposes only.