Are you saving up to buy a condo? Great! But before you buy a home, have you considered every aspect of condo ownership? We did some research for you. Here's what we found out!
When you buy a condo, you'll be living in a shared building. So you'll need to follow the rules. Yep, there's rules for everything in life. *Sigh* These rules could affect everything, from your balcony awnings to how many guests you can have over to when condo board meetings are held—and don't forget to check if your cat, Mr. Whiskers, is allowed!
The second thing to consider is that there are two kinds of condos. Do you want a divided co-ownership (so independent that it even has its own lot number!) or an undivided co-ownership (that shares a lot number with the other units in the building)?
Buying a condo means saving up, especially for your down payment. This step is like ripping off a band-aid—it won't be as bad as you fear! You don't need $100,000 cash to buy a condo. You can buy with only 5% down, as long as your condo costs under $500,000. But you will need to take out mortgage loan insurance.
Right now, you're probably asking yourself, "So just how much does a condo cost, in the end?"
According to Centris, the median price for a condo on the island of Montreal is $360,000. That means you can buy a condo close to your local zero-waste store with a down payment of only $18,0000 (5%). Of course, prices go down when you cross the bridge to the South Shore, where the median condo price is only $230,000. If you head to the North Shore, median condo prices drop to around $200,000—similar to prices in the Quebec City region.
As you can see, condo prices are all about location. A condo in Montreal might cost the same as a house in the country, but its value is likely to go up much more than that of a farmhouse out by Route 132.
Of course we all want that vintage two-storey condo with 12-foot high ceilings by Carré Saint-Louis in Montreal, but you've got to be realistic—even if it takes a cold shower and a slap across the face!
In addition to your down payment and mortgage, your condo will probably come with a little something extra: condo fees. Your monthly fees will vary depending on the type of building and its location. Just like condo prices, condo fees are much higher in city centers. If you're looking at a luxury condo with all the amenities in the Plateau, watch out for the condo fees!
It's no surprise that condo fees are highest on the island of Montreal, with a monthly average of $234. In the Saguenay region, you'd only have to pay an average of $101 a month—wouldn't that be great?
But it could be worse! In Toronto, fees for a two-bedroom condo average $628 a month.
If you find a place with ridiculously low condo fees, don't raise the roof right away—or it just might fall on you! Low fees can indicate a lack of maintenance. Feel free to call in an inspector and talk to the other condo owners. You'll find out pretty quick if they've been taking care of the building.
Maybe you've already figured this out, but the more money you put down on your condo, the smaller your mortgage loan will be.
Let's say you're buying a condo with two closed bedrooms in the Angus Shops neighbourhood in eastern Montreal for $400,000. If you make a down payment of 5%, or $20,000, and take out a loan with a 25-year amortization period, your monthly mortgage payment will be $1,870. That's if you have a 3% interest rate.
You're also going to have to decide if you want a fixed- or variable-rate mortgage.
The best option for you depends on your financial situation and risk tolerance. If your budget is stretched thin, you might be better off with a fixed rate which—you guessed it—stays fixed. If you've got a bit more financial leeway and can deal with a bit of uncertainty, you might want to pick a variable rate, which is usually lower than a fixed rate.
This is it: you've found your dream condo and your offer to purchase is about to be approved. But before your condo becomes officially yours, you've still got a few things to take care of. You'll want to get the condo inspected—there's another thing you need to save for!
Is the condo being sold with a legal warranty? It's not required, but it can protect you from hidden defects in your new pad, like mold in the walls or faulty wiring. You're probably wondering, "So just what are the advantages of buying without a legal warranty?" Often, these properties are less expensive. Estate sales often have no legal warranty.
You'll also need to conduct a title search to make sure your future condo is free of any mortgages (except your own, of course) and doesn't impinge in any way on neighbouring properties.
You should also consider the condo's contingency fund. It's a security cushion for the building. Each condo owner contributes to the fund, and if repairs are needed in the shared areas of the building, this fund will cover the costs.
Even if you hate reading the small print, take the time to review every detail. Have there been any recent renovations? Are any renovations planned? If you're looking at a new build, have you examined the preliminary contract, the inspection report and the details of the builder's guarantee? You should also take a look at the minutes of annual meetings and the declaration of co-ownership.
Between your down payment, mortgage loan and condo fees, now you've got a better idea how much your condo will cost. But have you also considered taxes, insurance and fees for the notary, inspector and appraiser? Or what it might cost to renovate the kitchen?
Let's go back to our condo in the Angus Shops neighbourhood:
1. Minimum down payment: $20,000
2. Mortgage payment, including mortgage insurance premium: $1,870 per month
3. Condo fees: $230 per month
4. Notary fees: $1,000
5. Inspection and moving expenses (optional): $2,000
6. Real estate transfer tax ("welcome tax"): $4,000
7. School and property taxes: $3,000 per year
8. Insurance: a few hundred dollars a year (although your condo fees cover damage to the building, you need to insure your own apartment)
In the example above, your initial costs (down payment, "welcome tax" and professional fees) will be around $27,000.
For the next 25 years, you'll pay at least $2,700 per month. That includes your mortgage payments, condo fees, property and school taxes and insurance. (Let's not get into your hydro and internet bills!)
Feel free to use our calculator to find out how much your condo will really cost you over the long term. If you're still not sure how to fit buying a condo into your financial plans, why not make an appointment with one of our experts?
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