38% of condo buyers not confident they could afford a condo fee increase
Do condo owners know that their monthly condo fees can increase at any time, and are they prepared for that possibility? Many are not. New research from TD Canada Trust, conducted by surveying condo buyers in Toronto, Montreal, Calgary and Vancouver, found that 68% of buyers didn’t realize condo fees may increase at any time and more than one-third (38%) say they don’t have confidence that they could afford an increase.
“Purchasing a condo may help you build equity, but the financial commitment of owning a condo may be larger and more complex than many buyers may realize,” says Farhaneh Haque, Director of Mortgage Advice, TD Canada Trust. “It’s important to do your research before you hit the open houses to understand the true costs of condo ownership.”
From burst pipes to leaky roofs, just like in houses maintenance and other costs can crop up unexpectedly, so Farhaneh recommends condo buyers create a cushion in their budget for unexpected expenses and start to build an emergency fund to cover possible special levies should they arise.
“Keeping a pulse on the health of your condominium’s finances, such as its reserve fund, can help you to create a realistic annual budget that anticipates condo fee increases and special assessments,” she says.
Is it really better to own a condo than to rent?
Owning a condo may help you build assets for your future, but Haque says there can also be long-term benefits to waiting and saving a larger down payment. A larger down payment can mean you pay less interest over the life of your mortgage, and if it’s more than 20% of the purchase price you won’t have to purchase high ratio mortgage insurance.
“When comparing owning to renting, you have to weigh all the costs including the purchase price of your condo, the size of your down payment, condo fees, property taxes, immediate repairs or renovations, interest rates and insurance, and compare these with how much you are currently spending on rent. Of course, you also have to place a value on the enjoyment and satisfaction that you will derive from owning your own home,” says Haque.
“Speak to a mortgage specialist who can help you crunch the numbers and walk you through the different mortgage options available so you can make an informed decision on whether you’re ready to buy a condo.”
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