If you’re looking for an affordable Toronto mortgage, condos are currently the way to go. While single-detached homes in the city may be fetching average prices between $600,000 and $800,000, condos are only half that (or less!) This, as well as their convenient location, modern upgrades, and easy living are what’s making this type of housing so popular right now. But before you slap down a big down payment on that condo you’ve had your eye on, have you thought about the fees involved?
Condo fees are one of the few inconveniences placed upon condo owners. Sure you don’t have to mow the lawn in the summer, shovel the walk in the winter, or even be concerned when the roof starts falling in, but you do have to pay those condo fees. And often, they can add up to hundreds of dollars a month that you’ll have to pay on top of that ever-affordable mortgage.
The fees are to off-set the fact that you, the homeowner, isn’t actually doing anything to contribute to the maintenance of the building you’re living in. People need to be hired, jobs need to be sorted out, and there often has to be someone on site to oversee any repairs. As a condo owner, you won’t have to do that. Instead you’ll just have to empty your pockets.
Ben Myers, vice president of Urbanation Inc., a company that tracks the Toronto market, especially condos says that in some areas, these fees are very high because of condos that are housed in very old buildings. He says that he saw the case of one buyer that was able to buy a condo in Toronto’s west end for only $60,000. But the building in which it was located was in such disrepair that the condo fees were $882 a month.
“Some of these old buildings are really deteriorating,” he says. “So they need to raise money to fix things.”
Unfortunately, the only place that money can really be raised from is from the owners and their condo fees.
But what might be even worse than condo fees are how unaware condo owners regarding them.
According to a survey done by Environics Research Group for TD Bank, 68 per cent of condo owners (or soon-to-be condo owners) didn’t realize that condo fees can go up at any time, while 38 per cent of respondents were fairly certain they would not be able to afford an increase. This is very common among condo owners, as many believe that condo fees are in a contract, much like their mortgage payments, and so they don’t believe that they can rise without notice. In fact, they can. During the third quarter of this year, condo fees on the resale market went up by two cents when compared with last year, now sitting at $0.59 a square foot. And condo fees on new condos went up too, one cent from the $0.48 they stood at last year to $0.49.
And when those fees do increase, there’s often little protection for the owner.Often when a buyer is purchasing a single-family or otherwise detached home, lenders will factor in a certain amount of utility and maintenance fees all in order to make sure that you can actually afford a home and not just a mortgage. Lenders still do this with condos, and that includes taking the condo fee into consideration. But Farhaneh Haque of TD Canada Trust says that when lenders are using the condo fee number, they split it in half. This also means that the lender, as well as the homeowner, could both be ignoring the fact that condo fees could rise at any time.
“We figure if you were buying a house you would have maintenance fees outside that we don’t factor. So when we qualify condo factors we deduct that fee by half,” says Ms. Haque. “We try to address the condo fee when we consider the affordability issue.”
But giant Toronto condo developer, Brad Lamb, says that he thinks both owners and lenders are actually making too much of condo fees.
“I’ve owned plenty of homes,” he says, “and they are money pits. You’re always pouring money into the roof, the furnace, plugged water lines, stopping raccoons. It’s a nightmare.”
We’re not sure that “nightmare” is the best way to describe owning a home. But it’s clear that whether you’re buying a condo or a detached home, buyers must be aware of all the fees, how much they are, and how they can change.
