The purchase price is something you will have to consider no matter what you buy, but before you settle on a budget you'll want to examine other costs that might also be part of your purchase.
With all home purchases, condo or otherwise, you’ll be required to provide a down payment and closing costs. Your down payment will be a minimum of 5% of the purchase price, depending on the price of the home and if the condo is in the pre-construction phase. If the condo is still under construction, you may be required to provide a minimum of 20% down, paid in milestones over the construction timeline.
The more you put down, the lower your mortgage payments will be and the better interest rate and options you may be offered by your mortgage lender. If you can provide more than the minimum, it will only work in your favour.
Closing costs are a sum of fees due before you take possession that covers items such as title insurance, land transfer taxes (if applicable), and attorney fees. These fees will likely add up to no more than 4% of your purchase price and are often less.
Like all owned property, an annual property tax will be due to the municipality. If you’re purchasing a resale condo, the tax information may be available on the municipality’s website. If the condo you’re purchasing is under construction, you can contact the municipality directly to obtain an expected property tax amount. Always budget for extra just in case this estimate is incorrect, as many factors can affect the amount of taxes you’ll owe each year.
You’ll have the option to pay one lump sum annually (generally in June), pay monthly directly to the municipality, or have the property taxes included in your mortgage payment via your lender.
In some cases, utilities such as heat, water, and gas can be included in your condo fees - this is something to check with the building. But additional utilities such as phone, cable, and hookup fees for all utilities are usually not. It’s best to ask what will be included when deciding on a condo to buy so you can anticipate additional costs.
Sounds like a bit of a strange question, doesn’t it? But depending on the condo you are buying, it may or may not come with appliances already included. If you’re buying a brand new this usually isn’t an issue.
However, with a resale condo where the previous owner has not included the appliances in the sale, you’ll need to purchase your own. This also means you’ll be responsible for a potential delivery and installation fee.
In order to protect your unit and your contents, it’s highly recommended to have homeowner’s insurance. This insurance covers you if there is a fire or disaster in your building and covers replacement costs on any lost contents. It will also protect you against liability, should you choose to include that coverage in your policy.
All condo properties require a monthly condo fee paid to the association for the management and maintenance of the building and property. This fee varies based on what is included and how well-managed the reserve fund is.
A reserve fund is a sum of money set aside by the condo association to cover major repairs and maintenance. It should be a well-managed account that contains enough money to take on any unexpected incidents. It’s ideal for you to ask to see the fund and its reports over the past several years to see how the fund is managed and if any recent major repairs have been done.
Condo fees typically include utilities, amenities, landscaping, building and property maintenance, and contributions to the reserve fund.
Even with a reserve fund, some unexpected things do happen that exceed the capacity of the funds set aside for this purpose. As a result, each homeowner within a condo complex is responsible for a portion of the overage. This is called a special assessment.
If the property is well managed, this is extremely rare. Although things do happen, and this is something to be prepared for in case it does come up. If it does occur, your condo association should be able to give you sufficient notice that a special assessment is taking place and a timeline along with anticipated costs.
When buying a condo, the purchase price may look very appealing for your budget. You do want to keep in mind there are other costs involved in purchasing and maintaining a home you own. If you factor these additional costs into your budget before you buy, you will be empowered to set yourself up for a predictable financial future.