If you’re a student interested in buying a condo in the future, make sure you do your homework if you don’t want to be stung by extra fees.
Almost 70 per cent of buyers don’t realize that their condo fees can increase at any time, says a recent study released by TD Canada Trust. And more than a third don’t have confidence that they have money to survive the increase.
Make sure to meet with a mortgage specialist
Jeff Meerman, a TD spokesman, says the bank conducted the study to raise awareness about problems that home buyers run into. He emphasized that it’s important for potential buyers to speak with a mortgage specialist.
“They can actually crunch the numbers and say that even though this is what your mortgage payment will be, realistically this is how much the cost of ownership will be,” he says.
Kevin Lutz, the Royal Bank regional manager of mortgage specialists, says that it’s important to look at minutes for strata meetings before committing to a new home.
“If the contingency reserve fund is low and there’s some major pending maintenance items due in the building, then you know you might be in for some fee increases,” he says.
It’s important to find out how much will come out of the contingency reserve versus what will come out of the homeowner’s pocket, says Vancouver realtor Gary Dhillon.
Condominium fees can increase when 75 per cent of the strata votes in favor of the motion.
An increase in fees means that homeowners need to re-qualify for a mortgage if they need to refinance in a few years, says Lutz.
Watch out for property tax
Another cost that new homeowners should watch for is the property transfer tax applied when a sale closes. The tax does not apply to properties below $425,000, but it costs buyers above the threshold thousands of extra dollars.A press release accompanying the study also mentions that sometimes it is financially advantageous for people to rent instead of buy.
Lutz says this decision is based on individual circumstances and there are too many variables to generalize.
“We can’t tell where the housing market is going to be or where the rental market is going to be, and it’s such an individualistic thing.”
Buyers being extra careful
Since the government tightened mortgage regulations in 2010, Lutz says that the bank has not seen a reduction in the number of people interested in buying, but buyers are being more cautious.
Sandy Wasfi, a first-time buyer, says that high fees will not deter her from purchasing a condominium as long as it’s going to make the place look better. “Not only will I live in this property for the next couple of years, but in the long term I’ll rent it out. If it’s worth it, it’s worth it.”
Heres local realtor Gary Dhillon giving some pointers on what new owners should look for when buying a condo
Reported by Jules Knox