The Definitive Guide To Deciding Whether A House or Condominium is Right For You – From Frank Leo & Associates

The real estate market is constantly in flux with prices going up and down and a whole media industry sensationalizing the latest developments, so it’s tough enough finding the right property especially if you’re not certain about what you’re looking for.

Homeownership in the classic sense is just that – owning your own house – but although owning a house is still the benchmark of success for many Canadians, times are changing. More and more would-be property owners are opting for the condo option. 

That’s partly because house prices are rising in Toronto & other major cities, but also because of the convenience condo ownership provides. The convenience of location and maintenance appeals to all types of owners, from empty nesters to young professionals who just don’t care to devote the time to property upkeep. 

As a real estate brokerage specializing in connecting home buyers with the ideal properties, Frank Leo & Associates have amassed decades of experience helping people figure out which type of property suits their lifestyles. In this article, we’ll share those insights with you and get you informed to make the right decision for your future. 

For further guidance with your house hunt, reach out to one of our representatives. We’ll work with you step-by-step to find the right property for the right price. 

Defining Condo vs. House

We’ll start with a short definition. Although most people are clear on the definition of a house – a detached or semi-detached property – condominiums can come in various incarnations. The word “condo” usually brings to mind a unit in a large glass tower, yet the definition includes more than just one type of dwelling.

Simply put, condos, or “condominiums,” are private residential units within multi-unit buildings or communities. Where the clarification comes in handy is that although condo residences are apartment-like in that they share walls, they can also be semi-detached like townhouses or even fully detached in some cases, a type of property most people might call a house. 

One distinction between houses and condos is that condo residents typically share common areas, amenities, and facilities both inside and out. These can include green space and yards, swimming pools, fitness rooms, laundry rooms, garages, & more. 

Types of Condos

The two primary types of condominiums are:

  • Buildings that are built as new condominiums, either as a new structure or sometimes in a reconfigured commercial or industrial spaces 
  • Rental apartments converted into condo units

These distinctions can impact property values and liveability, so be aware of the type of unit you are looking at if you’re considering a condo even if you can’t see the difference at a glance. Rental-conversion condos often look older and feel cheaper, however, and those qualities can both lower prices and necessitate repairs in the future. 

Condo Associations

Condos have a unique feature in that they have a condo association, a group of stakeholders run by a board of directors that takes responsibility for common decisions and maintaining common areas, services, and amenities. Unlike a homeowners association, a condo association holds much more power over its community because of the common nature of condo ownership. Condo owners pay regular fees, known as “condo fees,” to these organizations in exchange for the upkeep of amenities.

Comparison At A Glance

Now that we have definitions and details squared away, let’s take a quick look at the difference between buying a house and a condo, at a glance. 

Buying A House

When you buy a house, you have your own property and residential space to do with as you please. However, with that freedom comes responsibility. You’re solely responsible for paying all maintenance and ownership expenses. There’s also the mortgage, property taxes, utilities, & insurance to consider. Don’t forget to factor in home maintenance if you go away for an extended time, especially in the winter when the pipes can freeze if the water isn’t running. 

Buying A Condo

Condo owners own just the interior spaces of their units and sometimes a parking space, which usually costs extra. Everything in the condominium outside your unit is owned commonly with your neighbours. You’ll pay condo fees, usually monthly, which can cover everything from heat, hydro, and water to landscaping, building insurance, and maintenance & amenities. A typical practice among condo communities is for a portion of the condo fees to go towards a reserve fund which covers significant building repairs. That fund doesn’t cover emergency repairs, so residents may also face one-time “special assessment” fees.  

Comparing Condo and House Prices

To accurately compare the price of a house and a condo we need to look at how recurring condo fees compare with a mortgage. Since you can find condos worth as much as some homes and vice versa, just comparing the market prices of these properties won’t give you an idea of why property type is right for you. 

Since the condo association fee doesn’t go towards your principal, how much buying power are you actually missing out on? Let’s look at an example. 

If you had the average condo fee for a 594 sq. ft. 1-bedroom condo in Toronto, you’d be paying $386.00 monthly in condo fees. With an interest rate of 5%, that condo fee could represent nearly $70,000 more that you could borrow to buy a house and still have the same monthly payment. Simply put, if that condo fee was instead going towards a 30-year mortgage at 5%, you could afford to buy a house that costs almost $470,000 instead of $400,000.

Consult our mortgage calculator tool to do comparisons of your own. Also, be sure not to overlook the additional maintenance and amenities costs that come with buying a home. 

As we’ll explore in the next section, both types of property come with their own advantages and disadvantages. A homeowner may not be paying condo fees but instead pay more than the condo fees for all of the same amenities purchased independently. Likewise, a condo owner might be paying for amenities they themselves don’t use. 

Pros of Buying Condos

The value of a condo largely comes down to lifestyle conveniences. That convenience comes in the form of amenities, facilities, and location. They can include:

  • Modern unit features. Since many condos are built new, buyers set on owning a place with stainless steel appliances, granite counters, and a modern floor plan can usually count on getting them in a condo
  • Building amenities can include fitness rooms, party spaces, guest suites, rec rooms, and even tennis courts, spas, and swimming pools in more upscale condos. Having these close to home can save hours of commuting
  • Building security and concierge service provide peace of mind and a sense of security at home
  • Far less maintenance is required when you live in a condo. This is a big one for many condo owners, whether they’re young professionals too busy to handle upkeep or retirees who downsized. 

Cons of Buying Condos

For some property owners, there are downsides to owning a condo which outweigh the benefits.

  • You are in close proximity to the neighbours. Those who are used to urban living might not mind, but for others, noise and other reminders that there are neighbours can get intrusive 
  • Condo fees can rise, sometimes multiple times throughout your time in a building. They’re more likely to increase in older buildings which will probably need extra maintenance, and that’s not even counting the special assessments which may arise
  • Not being allowed to keep a pet or having other lifestyle choices restricted by the condo rules can be a deal-breaker
  • Regardless of how spacious a condo may be, it won’t have the space or layout of a house. Even with multiple bedrooms, the square footage of a condo is generally less than a house with the same number of bedrooms. That compact feeling is accentuated by the lack of features like hallways and windows which create a sense of airiness in a house. Private backyards are also not available in condos. 

Pros of Buying Houses 

Homeownership is rewarding for many reasons, not the least of which is that you have a home to call your own.

  • Any alteration, improvement, or update the homeowner wants to make is theirs to make as they wish
  • There’s no need to go through the approval process from a condo board and you don’t have to abide by any lifestyle rules
  • As covered above, the prospective home buyer can have more buying power since more of their monthly money can go towards the mortgage
  • A homeowner’s living space is all their own. The neighbours aren’t directly on the other side of the wall and there’s a backyard at your disposal
  • Homeowners who are handy can handle many of the maintenance and repair needs themselves, saving money and gaining experience for potential future upgrades or renovations

Cons of Buying Houses

With the added privacy of homeownership comes greater responsibility.

  • A homeowner is responsible for all maintenance inside and outside the property, including all the trees and plants in the yard
  • Upkeep may require extra tools and/or equipment. That can include everything from hand tools to lawnmowers
  • If you go away for an extended period of time you need to have someone take care of the house or at least come check on it, especially in the winter when the pipes could freeze
  • Utility bills are generally higher than in a condo because houses typically have more square footage 

Selling the Condo vs. Selling the House

There’s one last factor to examine, and that’s selling your property. Any seller considers the marketability of their property so it’s worth looking at how condos and houses differ in the real estate market.  

Although the property values of different homes in a neighbourhood do affect the value of an individual house being sold there, the particular characteristics of that house will have a greater impact on the selling price. However, when it comes to selling condos it can be hard to get a price above what all the other units in the condo are going for, plus upgrades. In a sense, the condo owner’s investment depends, at least in part, on surrounding sales. 

Refer to our Home Seller’s Guide for more information about selling your property.

Thinking of Selling in Toronto or The GTA?

If you’re thinking of selling property in Toronto or The GTA, Frank Leo & Associates can help you sell fast for top dollar value whether you’re selling a condo or a house. 

We’ve got decades of experience in local markets and help clients along every step of the way, from home evaluation to staging and final sale. 

Frank and his team are also available to answer any real estate-related questions. Just reach out to us through our website or give us a call at (416) 917-5466.

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Your Guide To Buying Your First Home in Toronto & The GTA From Frank Leo The #1 RE/MAX Agent in The World*

So you’re thinking of buying a home in Toronto or the GTA. As what could be the largest financial decision you will make in your lifetime, there’s no room for uncertainty when it comes to buying your first home.  You’ve come to the right place for expert insights into the process of buying a house in Toronto. Frank Leo is the #1 RE/MAX Agent in the world and has been helping clients buy and sell homes in Toronto & the GTA for 3 decades and has proudly served 1000’s of satisfied clients.

Although buying a house in Toronto may seem daunting, we’ll run you through the process step by step and leave you with a solid foundation of knowledge for this important decision.

What’s The First Thing I Should Do When Thinking of Buying A House in Toronto?

The first thing you should do before deciding on becoming a first-time home owner in Toronto is to sit down and evaluate your financial situation. Ask yourself a few questions:

  • Are you prepared to take on the financial responsibility of a mortgage?
  • How much do you have for a downpayment?
  • How much debt are you carrying?
  • Would you be able to handle a sudden change in your income?

Ask yourself the tough financial questions and be honest answering them. Doing so will help you understand where you are financially and if you would be able to handle the mortgage payments during leaner times.

There’s plenty more insights and details about deciding whether it’s the right time for you to buy your first home in Toronto in our Home Buyer’s Guide.

So You’re Ready to Buy A House in Toronto

Buying a house is a big investment, but luckily there is financial assistance available for first-time home buyers.

In 2009, Revenue Canada introduced the First-Time Home Buyers Credit (FTHBC) to help ease the financial impact of buying your first home in Toronto. As a first-time home buyer you may be able to qualify for the First-Time Buyers’ Tax Credit (FTHBC), as long as you meet the following requirements:

  • You or your spouse or common-law partner acquired a qualifying home; and
  • You did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer).
  • You cannot have lived in a home owned by you or your spouse in the past four years
  • You must present document supporting the purchase of the home

You also need to determine whether your home qualifies for the credit:

  • The home must be within Canada
  • The home can be a single, semi, townhouse, mobile home, condo, or an apartment
  • You must occupy the home within one calendar year of the purchase date

If eligible, you could receive a 15% income tax credit up to a maximum of $5,000 worth of home purchase costs from the year you purchased your first home. You can also receive credits on fees such as the land transfer tax.

If you’re seeking further guidance reach out to the Frank Leo, #1 RE/MAX Agent in the world, and get help taking full advantage of all the credits that are available to you.

Getting a Mortgage When Buying Your First House in Toronto

Before you start looking for houses, you may want go to a lender and get a pre-approved mortgage to ensure that your budget will allow for the purchase of your home in Toronto.

Do a little research on different lenders, as each lender may have different interest rates and conditions compared to other lenders. Make the decision about which lender you choose to take out a mortgage with carefully since you will be locked into a relationship with them for years to come.

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If for any reason you must change your lender after signing with them, a prepayment penalty may be charged against you. Read the terms and conditions of your mortgage contract and ask lots of questions if you do not understand.

Should I Work With A Mortgage Broker When Buying My First Home?

A mortgage broker can help you go to different lenders to try and find the best deal for you. With a broker, you may be able to get some mortgage products & services that are not directly available to the borrower, but the reverse can be true as well.

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There are mortgage products that are available only directly to the borrower and can’t be purchased through a mortgage broker. A smart buyer will compare brokers and the lenders they work with to find the best deal.

Need to crunch some numbers for your mortgage? Use our FREE mortgage calculator developed by the #1 RE/MAX Agent in the world, and take a step towards buying your home in Toronto.

You’ll Need A Stress Test Before Getting a Mortgage

A stress test is a way for lenders to measure a borrower’s ability to make payments during tough times. They need to know if the borrower would be able to continue with payments in case of a sudden change in income, job loss, or if an increase in interest rates were to occur.

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The Canadian Government requires that all federally regulated financial institutions issue this test in order for the borrower to be approved for a mortgage.  

Want to see if you can afford a mortgage? Use our mortgage affordability calculator tool to find out.

Here’s How The Stress Test Affects You When Buying Your First Home in Toronto

A stress test affects which homes you can afford to buy because it impacts the mortgage rate you’re able to afford.

Let’s look at a simple example.

Say you’ve applied for a mortgage at a bank after making a down payment of 5% of the value of your new home. Since your down payment is below 20% of the home’s value you’ll need mortgage loan insurance, which is an additional cost on top of your mortgage payments.

Now, if you don’t qualify for the Bank of Canada’s conventional 5-year mortgage rate of 5.34%,  you’ll need to add an additional 2% for the stress test to whichever rate you negotiate with your lender, let’s say 3%.

In this scenario, the total money you would be able to put towards your home would be less due to the extra percentage points that you must be able to cover in order for you to be approved for a mortgage.  

Although it’s not ideal for the borrower, the stress test is a requirement for anyone seeking to borrow money for a mortgage in Canada.

Hire a Realtor When Buying Your First House in Toronto

Don’t take any chances when it comes to choosing a realtor. Do your homework on the realtors you like and choose the best from the available selection. With an investment of this size you don’t want someone representing you who doesn’t have experience, success, or a winning strategy. Find a realtor that is dedicated to helping you find your dream home.

Whether you are a first-time buyer or not, a good realtor will understand your needs, answer any questions, and walk you through the home-buying process to make it as smooth as possible.

With a great realtor the home-buying process will be less of a stress. Your realtor will make it as easy as possible by keeping you informed and up to date every step of the way.

Ready To Buy Your First House?

When you are ready to become a home owner, whether it’s your first time or not, Frank Leo can help.

With 30 years of real estate experience in Toronto & the GTA, he has helped 1000’s of families find their first home. Contact Frank Leo to see how he can help you as a first-time home buyer and how he became the #1 RE/MAX Agent in The World.

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