First time buyers need to know what price range they can afford, both in terms of personal choice and mortgage approval purposes. What they don’t often realize is that the condo fees can make or break their ability to purchase.
The condominium market has grown rapidly especially in the Toronto and Vancouver urban markets. The benefits of not having to maintain the outside of your home, the peace of mind of having a security guard, and the resort like amenities have made condominiums the lifestyle choice for many Canadians. These benefits however, come at a price. You can expect condo fees on entry level units to range anywhere from $400 to $750 per month. These condo fees are an additional expense that the mortgage company will take into account. The good news is that only 50% of the condo fees are added into your qualification formula. The rationale is that a condo owner won’t experience many of the same expenses of a freehold home owner.
A mortgage approval for a purchase price of $300,000 (with only 5% downpayment) means that the lender has approved you for a mortgage payment of $1,385 per month. If you now decide to buy a condo with a $500 monthly condo fee then your mortgage affordability drops to $1,135 a month or a purchase price of only $240,000.
If you are considering a condo then make sure you know the range of condo fee’s you’ll have to pay and let your mortgage company know. The more information your lender has up front the fewer surprises you’ll face when it comes time to buying your home.