Home ownership is a big deal and can be a bit overwhelming your first time around. As the millennials begin to dip their toes into the real estate market for the first time, they are can be faced with numerous obstacles. The Toronto housing market is, and has been, steaming hot for some time now. That’s why condominiums are a great, manageable way to enter into the realm of home ownership. Here are some things to consider before investing in a condominium.
Buying New vs. Resale
Second to deciding on what your ideal locations may be, you should weigh out whether you would prefer a re-sale condo, or a newly built one. There are benefits and drawbacks for both to consider. Here are just a few:
Benefits of buying a new condominium:
- You may be able to find a better price depending on the location, builder and market conditions.
- You have the ability to make some changes and upgrades to better suit your taste. This also gives you the opportunity to really add extra value to your investment by strategically adding upgrades that will increase its resale value.
- You are provided with new home warranty protection.
Disadvantages of buying a new condominium:
- Your deposit will be tied up throughout the entire construction process.
- Construction is not always completed on time.
- You may have to endure the noise and hassle of construction of other units once moving in.
- You choose your unit based on a floor plan (a drawing outlining the layout of the unit) and a showroom stylized for sales; this means you cannot actually see what it is you are buying, running the risk of disappointment.
- You cannot find out what kind of community you are buying into. Is the building going to be primarily rented? Condos occupied by the owners are usually better cared for.
Benefits of buying a resale condominium:
- What you see is what you get. Buying a resale means less opportunity to be surprised or disappointed with your decision.
- You can move in sooner, depending on the conditions of the sale.
- The required deposits are usually much lower for a resale purchase.
- You can learn more about the community you’re moving into and ensure that it is a good fit for you and your lifestyle.
- Older condominiums are sometimes built with larger units or added features like parking at no extra cost.
Disadvantages of buying a resale condominium:
- Less choice. You do not have the same opportunity to decide on finishing’s and upgrades; these would need to be changed by you, at an additional expense.
- Older buildings may be slightly out of date or have run down amenities. This can also impact you maintenance fees due to frequent renovation.
- The building may require major repairs that could require extra charges.
- You will only receive a portion of the new home warranty, if it hasn’t expired.
Whether a condo is new or old, all condominiums require that you pay a maintenance fee. This is a monthly expense that goes to the maintenance, repairs and upkeep of the building. Fees range widely between buildings and may fluctuate over time. When looking into a condo, compare the condo fees with other buildings with similar amenities, age and size. When seeing the monthly cost, you may decide having a pool on sauna is not that important to you after all.
When looking into condo fees for a newly built condo, keep in mind that increases may occur in the second to third year of ownership. The developer will estimate what the appropriate condo fees will be, but this number can drastically change based on the board elected to manage the building. One of the biggest complaints of people living in condominiums is that they disagree with how the condo fee revenue is being spent, so be sure to participate or even run to be a part of the board in order to have a say in how your investment is being managed.
Know What You Can Really Afford
Speak to a mortgage broker to determine what kind of mortgage will best suite you and to see how much of a mortgage you can comfortably afford. One of the biggest mistakes first-time buyers make, is going in over their heads. When considering your down payment and mortgage for a new condo, don’t forget to factor in any additional costs like:
- An educational levy
- Two months of condo fees
- A prepaid occupancy fee
- Development charges
- A parks levy
- The law society of Ontario fee
- A heat pump fee
- The discharge of developer’s mortgage fee
Resale condominiums also have additional, and sometimes unexpected, costs like:
- A high ratio mortgage insurance fee
- The land transfer tax
- A prepaid tax reimbursement
- A bank appraisal fee
- Mortgage broker or application fee
- Any legal fees
If you’re in the market for your first condo and have any questions or concerns about mortgages, contact us!