The costs of owning a Condo
In the previous chapter of our 10-part First Time Buyer's guide, we added up the costs of buying a condo in Toronto in 2019. Let's assume you've paid your lawyer and hopefully enjoyed your first-time-buyer rebates. Now we’ll help you understand and predict the costs of condo ownership.
The big three costs are mortgage payments, maintenance fees, and property taxes.
Sample costs for a $600,000 condo with a 10% down payment
The median price of a condo in Toronto is around $580,000. We used a 600k example in the previous chapter where we counted the costs of buying, so we'll stick with it here.
Paying your mortgage
The most important payment you make each month is your mortgage payment.
Your monthly mortgage payment will depend on the size of your down payment, your mortgage rate, and your amortization period.
Our sample condo had a purchase price of 600k with a 10% down payment of 60k. The mortgage is for $556,740 (540k + mortgage insurance of $16,740 with an interest rate of 3.25%). The payment term is 25 years.
The monthly mortage payment with these terms is (roughly) $2,707.
We take a closer look at mortgages in the next chapter, What is a Mortgage?
Condo maintenance fees
After your mortgage, your next major monthly payment will be your maintenance fees. As we detail in Chapter 1: What is a Condo?, maintenance fees are a shared cost paid by every owner in a building or condo townhouse. They go towards everyday building costs like cleaning and concierge staff, and a percentage are put away for maintenance and repairs.
Every condo owner pays maintenance fees on a monthly basis once they take ownership. Fees are charged based on the square-foot size of the unit. In Toronto, the average maintenance fee is about $0.64 per-square-foot.
Our sample condo is 800 square feet and its maintenance fees are $512 per month (800sqft x $0.64). Maintenance fees are a very important consideration when you're serious about buying a condo. Our condo maintenance fee study breaks down many of the myths and mysteries about maintenance fees.
Our fee example uses price per square foot. It's a useful way to evaluate the costs of buying and owning a condo and to compare units when you're close to buying. You'll see this stat used on condos.ca to evaluate buildings, condos that are for sale, neighbourhoods and the city itself. If you'd like to know more, we explain the value price-per-square-foot analysis here.
Condo parking spots
Parking spaces in condos do get sold separately and can cost anywhere from $10,000 to $100,000, depending on the building. When a resale condo has a parking space attached to the unit, it is priced into the sale price. But there’s a monthly upkeep fee. If you need another parking space you can usually rent one from another owner.
Only owners who have a parking space pay the additional maintenance fee for the garage or parking space.
The average cost for parking in a condo is $46/month. If you're renting a spot you can expect to pay $100 to $150/month
Condo property taxes
Once you own property in Canada you have to pay property tax once a year. Toronto property tax pays for public schools and libraries as well as emergency services, running water and waste treatment.
Your property tax bill is based on the municipal tax rate, education tax rate, and the value of your property. For our $600,000 condo example, the Toronto property tax would be around $3,800 a year. You’d want to put aside $316 a month to pay for that. You probably won’t, but you should.
Condo homeowners insurance
Most often, one of the costs that your condo maintenance fees cover is building insurance for the common areas like the lobby, elevators, and gym. Building insurance does not cover your suite or personal belongings, however.
To protect your unit, pretty belongings, and life savings you should consider home insurance for your condo. Condo home insurance is not mandatory, but it is a smart way to protect yourself. Condo insurance costs range from $20-50/month.
If the cost of the large-scale project goes over the reserve fund, the condo board turns to the condo owners and charges a special assessment.
Special assessments in condos
Sometimes in a condo building a big surprise service or upgrade needs to be made—the roof needs to be repaired or the heating and air-conditioning needs to be replaced. Ideally, the condominium board dips into the condominium corporation's reserve fund to pay for major work. The reserve fund is like a building's savings—rainy day and utter disaster—account. We explain this and more in Chapter 1: What is a Condo?
Some insurers also include special assessments as part of their condo insurance policy.
The cost of special assessments in condos could amount to anything, potentially. It all depends on the service or repair in question. It could even be a lawsuit that causes the special assessment. It’s not uncommon for special assessments to be upwards of $10,000.
A well-managed condo reserve fund is the best protection against special assessments, but it’s important to know about them and to have a financial plan ready in case one comes a-knockin’.
In the next chapter of The Condo Buying Process, we talk mortgages. We explain interest rates, mortgage pre-approval, mortgage brokers and much more.
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