Buying a condo is a big milestone, whether you’re planning on making it your home or an investment property. Aside from your initial purchase price and monthly mortgage payments, there are various other costs that come with this purchase. From maintenance fees and parking to shared amenities, it’s important to factor in all of these additional costs as they can impact your overall home affordability. To best prepare you, we’ve put together a list of the key expenses to budget for prior to making a condo purchase:
Maintenance Fees
Condo maintenance fees are a monthly cost that all condo unit owners are required to pay for any building expenses. In most cases, this money is used for utilities such as water and garbage collection, building insurance, and for the maintenance of shared amenities such as fitness facilities, indoor/outdoor pools, lobby and concierge areas, landscaping and cleaning. These fees are charged by the condo itself and typically range between $300 and $500 per month, depending on the size of the building and the amenities included.
Closing Costs
Closing costs are additional expenses that typically account for 1.5% to 4% of a home’s purchase price. Oftentimes, closing costs are paid when the property title is officially transferred from the seller to the buyer; however there are some cases when these costs are incurred before the closing date. Some of the closing costs you should account for include:
Homeowners Insurance
This is a form of property insurance that covers losses and damages to the condo unit and/or any assets in the condo. If the unit you are buying is brand new or pre-construction, New Home Warranty insurance will be included in your purchase price. New Home Warranty insurance
generally includes deposit insurance and protection against defects in work and materials as well as major structural defects. However, home insurance is an additional separate cost.
CMHC Insurance
If you’re making a down payment of less than 20% on your condo, you’ll be required to pay CMHC Insurance. This expense is separate from traditional home insurance and is added to your monthly mortgage payments. The amount of CMHC Insurance you have to pay is calculated as a percentage of your down payment amount. For example, if you’re making a down payment between 5% and 9.99%, you’re required to pay a 4% premium on the purchase price of your home. However, if you make a down payment between 15% and 19.99%, you will be required to pay a lower premium of 2.8%.
Land Transfer Tax
This cost is often overlooked and can amount to a large sum of money depending on where you’re buying. In most provinces, Land Transfer Taxes are calculated as a percentage of the property value. Another thing to keep in mind is that some cities like Toronto and Montreal add a municipal tax in addition to the provincial land transfer tax. Luckily for first- time buyers, there is a Land Transfer Tax rebate available to help offset this additional cost.
Lawyer Fees
Lawyer fees are another expense you can expect upon closing. This cost will range based on the purchase price of the home and the lawyer you choose to work with. When buying a condo, your lawyer will help you understand the contracts, leases, appraisals, inspections, legal documents and other important processes involved in acquiring the property. Typically, this cost ranges between $1,000 to 3,000.
Property Taxes
Condo property taxes are used to maintain the needs and services of the community, including garbage pick-up, fire protection and maintenance of public spaces. This cost is dependent on where you choose to buy and could also vary based on the development.
Title Insurance
This provides coverage for the home owners’ rights of ownership, including fraud, forgery and missing heirs. In Canada, this insurance typically costs between $150 to $350 and is purchased through your lawyer.
Appraisal Fee
A property appraisal fee covers the cost of getting your home professionally evaluated and having its market value estimated. This will typically cost around $300; however, it may vary depending on the appraiser and your location.
To best prepare yourself, it’s essential to account for all of these additional costs before making your condo purchase. These expenses can make a huge difference in your home affordability and substantially impact your budget. To get a better understanding of your closing costs on a potential purchase, check out our closing costs calculator today.