Working with a mortgage broker is a different experience than working with a bank specialist. It’s also a different part of the home buying process compared to working with your Realtor. Some people may have never worked with a mortgage broker before and don’t know what to expect. Because of that, there are some questions…Read Article
What You Need to Know Before Buying a Condo
You’re hoping to buy a condo, so it’s time we talk about money!
Condos have become an extremely popular choice for people looking to get into the real estate market, looking to downsize, invest in a city or live in a lock and leave community. With any real estate purchase, there will be fees and associated costs that come with it.
In this article, I’ll discuss everything you need to know before buying a condo, including all of the fees you’ll need to save for.
Financing your new condo.
Owning a condo gives you a lot of freedom. When you purchase a condo unit, you’re buying into the community that is there and the amenities that are available to owners. This is a really great option as well as it’s more affordable than a single-family home. Some common amenities can include community garden space, pools, hot tubs, gyms, etc.
Here are the fees you can expect with your condo purchase.
Your Debt Ratio.
I wrote an in-depth article about your debt ratio, and it’s one of the most important parts of buying a home to understand. Thankfully, I am here to help with this process, so it doesn’t have to feel overwhelming for you at all.
When we work together, I will calculate your costs vs your income to qualify you for a mortgage. Your Gross Debt Service ratio is your mortgage principal, interest, property tax, heat and 50% of your new condo fees. After we calculate that, it gets divided by your pre-tax income and should come out less than 39% and some lenders will want it below 35% depending on your credit.
Next up is your Total Debt Services, which is your gross debt service, vehicle payments, any other loans you have, etc and the other 50% of your condo fees. That is then divided by your pre-tax income again and will need to be less than 42% to 44% depending on your credit.
Don’t let these numbers stress you out too much. I am here to do the heavy lifting for you in this part. You just have to provide me with all of the information and I’ll calculate everything for you.
Condo Strata Fees.
There are monthly fees associated with owning a condo. These are call strata fees. These fees are for the amenities and common areas included in the facility, utilities, and a reserve fund for maintenance work needed. Different condo buildings have different strata fee amounts.
When you work with your realtor, you will know how much your condo fees will be every month. It’s important to add those to your savings catalog to ensure you’re able to afford these fees along with your mortgage payment.
If your down payment is between 5-19.9%, Lender / CMHC insurance is mandatory. It’s insurance that protects the lender in case you stop making payments or default on your mortgage loan. There are three insurers in Canada, CCMHC, Sagen and Canada Guaranty and all serve the same function.
Generally at 20% down, you do not have to pay this Lender insurance.
Like any home purchase, there will be legal fees that you will have to account for. You will have to work with a lawyer to go through the disclosure documents and ensure that the contract is legal and binding. When you do this, there will be fees in place.
If you’re in need of a lawyer recommendation, please reach out to me. I am happy to provide some different options at varying rates in Kelowna. But on average, you’ll be looking at anywhere between $1,500-2,000 give or take who you work with.
Property Transfer Tax.
Even when you buy a condo, you will still have to pay a one-time property transfer tax. But, luckily for you, if you’re a first time home buyer, you may be exempt. If you’re a first-time home buyer and your property is less than $500,000, this tax is not something you need to worry about.
To learn more about first-time home buyer benefits, check out my First Time Home Buyers page on my website for up to date information. If this is a very important tax for you to skip out on, ensure that you look at condos that are under the $500,000 price range.
And finally, the last fee associated with buying a condo will be your monthly mortgage payment. Once I receive all of your information and down payment details, I will be able to go through your different mortgage options.
Once everything is approved, you will know your mortgage payment and how much will come out of your bank account biweekly or monthly.
Get Started Today.
If buying a condo is in your future plans, get started on the mortgage process today. We will go through everything I’ll need from you and begin the approval process. Give me a call at 250-826-3111, reach out to me through my website or fill out my pre-approval form and I’ll be in touch with you soon!