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6 Points to Consider Before Buying a Condo

10 June 2019 by National Bank
Buying a condo

Are you ready for a fresh start and looking to buy a condo? Buying a condominium is a major decision, and it’s a good idea to consider several aspects so you can make an informed decision. Here’s what you should do.

1. Choose the type of condominium

The condominium market is diverse and can meet the needs of several buyers.

For example, a condo is a divided property. This means that it is independent from other units in the building and it has its own lot number (cadastre). By contrast, co-owners jointly own the common areas of the building. They therefore pay condo fees to maintain the front entrance, hallways, shared terraces and the exterior siding of the building.

An undivided co-ownership is a property with a single lot number that people own together. This is most notably the case when owners of a triplex convert the property into a co-ownership. The building costs are then assumed by all owners in proportion to their respective share.

2. Determine your downpayment options

Downpayments are often the source of many questions. For example, for a divided condominium with a value of $500,000 or less, the minimum you would have to pay is 5% of the sale price. However, you always have the option of making a larger downpayment.

If your downpayment is 20% of the purchase price, you will not have to pay for mortgage loan insurance. However, it’s a good idea to save your funds, since purchasing a property involves a number of fees, such as for the notary or for pre-purchase inspection. If you are considering an undivided condominium, the minimum downpayment is 20% of the purchase price.

3. Request or forego a legal warranty

You’ve found a rare gem. Congratulations! However, the property description says that it is sold “without legal warranty of quality, at the buyer’s risk.” Should you be concerned?

Normally, the property seller must guarantee that the property is free of any title defects or hidden defects, except those mentioned during the sale. The seller is therefore protected from any legal action if you find hidden defects once you have settled into your new home. However, legal action is a possibility if you find defects that the seller knew about and should have identified during the sale.

Generally, the legal warranty of ownership is not excluded. It ensures that the property is free of all mortgages, except those assumed by the buyer, and that is not subject to encroachment. However, if the seller has not lived in the property—as is the case with an inheritance or repossession—the quality warranty may be excluded.

4. Research the area

You’ve fallen in love with a condo, but how do you feel about the neighbourhood? For example, is there enough morning light in the dining room?

It’s in your best interest to take some time to walk along the surrounding streets. Visit the property at different times of day to ensure that you will really like it there.

Talk to the neighbours, too—it’s the best way to get a feel for the pulse of the building, neighbourhood and general area. Do people often throw parties in the building? Do several of the co-owners have long-term renters or rent to travellers? By spending time around the property, you will quickly find out.

5. Read the important documents

Are you ready to make your purchase offer? For cautionary reasons, this is conditional on not only an inspection, but also an analysis of financial statements, building regulations and the co-ownership declaration.

Take the time to carefully look over the details concerning condo fees and confirm the state of the contingency fund based on previous work done as well as future work to be carried out on the building.

You’re about to choose your living space—make sure that the rules work for you. For example, will your pet be welcomed there? Are you allowed to have a BBQ? You can also request the minutes from annual meetings to see if the co-owners have a positive relationship and if there are any legal cases.

If the condo is new, properly review the preliminary contract with the builder, the memorandum (if the project has more than 10 units), the inspection report and the warranty details. To get a clear understanding, don’t hesitate to consult a professional.

6. Choose the mortgage term

Choosing between a fixed or variable rate depends on your financial situation and your risk tolerance.

If your budget is tight and you are unable to live with a sudden rate increase, you should probably opt for a fixed rate. If you can tolerate a bit of uncertainty and some fluctuation, you should probably opt for a variable rate. What’s more, a variable rate is generally lower.

After considering these different points, including details regarding a mortgage loan, you can move forward with buying a condominium that best meets your needs.

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