A condo unit offers numerous benefits for those looking to get into the real estate market for the first time, downsize, or expand their investment portfolio. Although not as big as a single family home, living in a condo building offers flexibility and the opportunity to live in bustling urban cities.
If you're interested in buying a condo in the near future, stick around to learn more about some of our best tips to ensure your experience is as positive and streamlined as possible!
What is a condo and what are some of its characteristics
A condo, also known as a condominium, refers to a building or complex that is divided into multiple units, each of which are owned separately. Additionally, condo living offers common areas and amenities throughout the building that are jointly owned by all residents who live there. Here are some common characteristics of condos:
Private ownership
Each individual unit within the building is privately owned. This means that condo owners have the ability to live in the unit themselves, lease it out to tenants, and sell the unit at their own discretion.
Common areas in the building
Common areas in a condo are owned by all condo dwellers. Depending on the building you live in, common amenities may include swimming pools, gyms, outdoor sports courts, clubhouse, outdoor BBQ areas, lobbies, hallways, elevators, and other shared spaces.
Condo association or condo
Most condos have condo associations or condo corporations, which is similar to homeowners associations or HOAs. These are meant to govern the building, enforce rules, manage the budget, collect monthly condo fees, and maintain the common property through the condominium complexes.
Overseeing of condo building
The condominium corporation ultimately has the power to govern and enforce condo rules for all residents living on the property. This includes noise levels, pet policies, renovation guidelines for private units, and how to use common areas.
Monthly condo fees
Once you've moved into your condo, you'll need to pay a monthly fee on top of your mortgage payment. These maintenance fees cover daily operational costs, such as repairs and maintenance of all of the common areas, utilities for these areas, condominium complex insurance for common areas, and other costs like the salary of your property manager, concierges, cleaning, snow removal, and security.
Condo owners reserve fund
Another portion of your monthly fees is put toward what is known as a reserve fund. This fund is used for major repairs and improvements to the building, such as installing a new roof, replacing an elevator, or updating the heating and cooling systems in shared spaces.
How much money should you have for a condo?
The overall amount of money for a condo really depends on numerous factors. Here are some things you need to consider before buying a condo:
Location of the condo
One of the most important factors that will determine the cost of your condo is location, such as the city and neighbourhood and how close it is to essential amenities and transportation. For example, condos in areas with a lot of urban development will be more expensive than in areas further away from the downtown core.
Your down payment
To get a mortgage and purchase a condo, you will need a down payment, which can range from 5% to 20% of the actual purchase price of the condo you're looking to buy. So, keep in mind that a more expensive condo will require a larger down payment. Further, having a larger down payment can help you get a more affordable mortgage rate.
Getting approved for a mortgage
Your credit score, income, how much debt you have, and what you do for work will all influence whether you get approved by a mortgage broker or not. For example, having a higher credit score, a steady job, and minimal debt can work favourably for you.
Closing costs
When your condo offer has been accepted, there are costs that will need to be paid. These costs can include money to your real estate lawyer, commission to your real estate agent, insurance, taxes, and more. Closing costs are typically between 2% and 5% of the condo purchase price, depending on what province you live in.
Monthly condo fees
Once you're living in your condo, you'll be responsible for paying monthly maintenance fees on top of your monthly mortgage. This helps keep all common properties throughout the complex functional and operating smoothly.
Property taxes
Even though you live in a shared building after buying a condo, you'll still need to pay yearly taxes based on the value of your condo. So, make sure you're able to keep up with these ongoing costs similar to those living in a single-family home.
Insurance
Even though part of your monthly maintenance fees will go toward insurance for the building, it won't cover your private living space or belongings. Therefore, to protect your items and interests from insurance risks, you'll need to purchase your own insurance. The cost varies based on how much coverage you want.
Utilities and maintenance
While some utilities will be covered by condo fees, it's important to note that it will only cover the cost of your utilities for any of the common areas in the apartment building. So, you'll have to pay for the utilities for your own unit on top of your mortgage and condo fees.
Your lifestyle and the amenities you want
Condos with a lot of amenities often pay more than those buying a condo in a building that is older and with minimal common areas.
Is it worth it to buy a condo in Canada?
Whether or not it's worth buying a condo in Canada as opposed to a single-family property really depends on your individual circumstances, finances, and lifestyle. Therefore, we recommend speaking to your financial advisor about your current financial health and whether condo ownership is right for you.
What are the potential disadvantages of buying a condo in Canada?
While owning a condo is a great choice for a lot of Canadians, condo living isn't for everyone. This is why it's important to get a full grasp of the potential downsides to owning this type of property. Here's a closer look:
The overall costs
On top of your mortgage, condo owners are also responsible for paying monthly condo costs that to some, may not be worth the cost. In addition to monthly fees, you'll also need to pay tax on the property each year, have your own insurance plan, and pay for the cost of utilities, repairs, and maintenance.
The restrictions
Condos come with a lot of restrictions. Whether it be about pets, renovations, noise levels, what you can and can't put on your patio, and other rules that some individuals may not like as it does not fit with their lifestyle.
Lack of privacy
When you live in a condo, you'll be sharing walls, floors, and ceilings with neighbouring unit owners, which can not only be annoying, but also decrease your level of privacy. Further, because you'll be sharing common areas with everyone else living in the building, you won't have as much control over what times you can use the amenities to begin with.
Limited outdoor space
Unlike a detached house that has an outdoor space for you to hang out, entertain, and play with pets if you have any, living in a condo can be quite limiting. With most having small balconies, living in a condo may not be the right choice for those who enjoy spending time outside.
Less control of your property
Because your condo will be controlled by an association and management company, you won't have as much control over your unit than you would with an actual home. For example, decisions about the building’s interior and exterior maintenance, management company, and major updates are often left up to the condo board to decide, which can lead to disagreements.
Poor management
If your condo is run by a poor management company, it can put a serious toll on your lifestyle and the condo community within your building in general. Not only can it lead to increased fees, but it can also lead to poor upkeep of the interior and exterior common spaces, which can impact your overall investment.
Resale values may deteriorate
Like any real estate purchase, because the market is subject to change, the value of your condo may decrease over time, which means that you could lose money on your investment.
Before making a decision on whether to buy a condominium or not, we suggest weighing the pros and cons of ownership. We also recommend speaking with your financial advisor to determine your best course of action moving forward.
Do you pay property taxes on a condo in Canada?
Yes, even though you'll be a condo owner, you'll still need to pay your own property taxes each year. A common misconception with condo ownership is that because you're living in a building with other residents, taxes are shared. However, as a condo owner, you are responsible for any taxes related to your unit and its assessed value, just like you would with a single-family house.
Therefore, before buying any property, especially a condo, where the monthly costs can increase over time, it's important to look at your finances and confirm whether it's a wise financial idea before putting down an offer on a place.
Tips for buying a condo in Canada
If you're ready to live a condo life, there are a couple of things that you need to know before moving forward with your condo purchase and some tips to help you along the way:
1. Your budget and pre-approval for a mortgage
Ask yourself how much you can afford to spend on a condo. Then, get pre-approved for a mortgage with a mortgage broker to get a better idea about how much you can borrow from them. This can not only help you determine your overall price range of condos to look at, but it can also help sellers know that you are serious about purchasing their home, which may help in the scenario where there is a bidding war.
2. Status certificate and other condominium documents
When looking at different condos in Ontario, make sure that you review the status certificate for each building. This document essentially outlines crucial information about the financial health of the condo corporation, any rules and regulations that govern the building, whether there are any legal claims filed against the condo, and whether special assessments have been given to unit owners.
Special assessments occur when significant repairs are required in the building due to unanticipated damage that exceeds the policy limits of the corporation's master insurance plan. For example, if a severe storm damages the building and the insurance plan only covers damages up to $300,000, but the total cost of repairs is $500,000, the remaining $200,000 will be split between you and other unit owners.
3. Location and neighbourhood
Research the location of each condo you're looking at to see whether it works for your lifestyle. Ask yourself if it's closer to where you work, public transportation, schools, and amenities like shopping, restaurants, and other activities. You should also do a bit of research into the neighbourhood in terms of safety and whether there are any development plans for the future.
4. Building amenities and features
Take a look at all of the amenities each building has and whether it is worth the cost of the condo fees. Keep in mind that condos with more amenities may have costlier fees each month compared to buildings that don't have as much to offer to their residents.
5. Condo fees
You also need to have a good grasp of what your monthly condo fees are and what they cover. These fees typically include maintenance of common areas, insurance, utilities for common areas, and money for the reserve fund.
6. Reserve fund
Speaking of the fund, one of the most important things you need to check is the status of the reserve. Because this money is used for major repairs and replacements, a healthy reserve fund indicates good financial management by the condo corporation.
7. Inspection of the property
Think about getting a home inspection done by a professional before making an offer on the unit. This can help identify any potential issues that may not have been disclosed or problems that are not going to be covered by your condo corporation.
8. Property managers
Have a look at the overall reputation and performance of the property management company responsible for looking after the building. It's important to live in a building that has good management as it can directly affect the overall condition of the building and your quality of life as an owner.
9. Real estate agent
Work with a real estate professional who is experienced and well-versed in condos. An experienced agent should be able to give you important insight throughout the buying process, guide you through negotiations, and answer any of your questions or concerns.
10. Understand the rules and regulations of the building
Before purchasing a condo in the future, it’s also crucial that you thoroughly understand the rules and regulations of the building you're looking at. These regulations will influence your overall lifestyle and will determine if you're able to have pets or not, how early or late you're allowed to make noise, and more.
11. Consider the current condition of the building
Another essential consideration is the current condition of the building. Does it look like it's well-maintained and clean? Are there any warning signs that could suggest that the building has structural issues that need to be fixed?
12. Shop around for the best mortgage rate
Just like insurance, we suggest shopping around and finding a mortgage lender or mortgage professional with the best rates. This can not only help you save money on interest, but it can also determine whether or not you get approved in the first place.
13. Take a look at your insurance needs
Once you've moved into the unit, it's also important to consider your insurance needs. Condo coverage is meant to protect your personal belongings and the interior of your unit from damage and losses. It can also offer protection against liabilities. Purchasing condo coverage can help you protect your investment and your peace of mind.
14. Understand any regulations around renovations
Moving into your own space is exciting, especially if you have ideas on how you want it to look. Just keep in mind that some condos have regulations about what type of renovations you can do to your interior, even if you own the unit outright. So, make sure to ask your agent for further information about what is and isn't allowed before starting any projects.
15. Real estate lawyer
Lastly, consider hiring a real estate lawyer to review all of the necessary legal documents, including the purchase agreement and status certificate. They can also help you close the deal on your new real estate purchase.
Get high-quality condo insurance with BrokerLink today!
Just purchased a new condo? Congratulations! To ensure your investment and personal belongings are comprehensively protected against unexpected losses or damages, partner with experienced brokers from BrokerLink when buying your condo insurance.
The team at BrokerLink has years of experience in the insurance industry, partnering with new condo owners. With locations across Canada, there's a chance we could be in your neighbourhood! If you want to work with us in person, don't hesitate to visit us in the office at any time. You can also reach out to a broker over the phone during regular business hours.
Want a competitive insurance quote from the comfort of your own home? Check out our free, easy-to-use online quote tool!
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