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.

Image of a bag of money being exchanged for a house to illustrated buying a house as a millennial.

Advice For Millennials Thinking of Buying a House In Toronto Or The GTA From Frank Leo, The #1 Individual RE/MAX Agent in the World

With almost 65% of millennials saving money with the intent of buying a house in Toronto or elsewhere, we want to provide first-time homebuyers with the best possible advice and insights when it comes to what could be the largest financial decision of a lifetime.

Taking the right approach when investing in Toronto real estate can make a tremendous difference in your adult life. This goes for buying as an investment or as a primary residence. A small mistake could mean the difference between a benchmark investment and an issue plaguing your finances for years to come.

Remember that Frank Leo & Associates, the #1 RE/MAX Team in Canada** led by the #1 Individual RE/MAX Agent in the World* are here to answer you Toronto real estate questions at any time. If you have any questions about home ownership that are outside the scope of this article, don’t hesitate to reach out and contact us.

Benefits of Being a Millennial Owning a House in Toronto

If you’re considering buying a home in Toronto & the GTA, you’re no doubt aware of some of the many benefits it can provide. You can use it to generate income, use home equity as collateral, or sell at a profit.

For some people, the feeling of not paying rent anymore justifies the commitment of paying for a house.

However, before you make that commitment, which is significant, you should be aware of everything that comes with it. Going into a big decision like buying a house blind is a sure way to make life difficult for yourself.

Understand What Buying a House in Toronto & The GTA Involves

Owning a house is a big responsibility, both financially and in terms of your day-to-day life.

In maintaining a house and the grounds takes a lot of work. It can be a bit of an adjustment for the uninitiated.

It could also limit your mobility when it comes to travel. If you plan on going away for a longer period of time the house will need maintenance.

In terms of finances, buying a house with a mortgage makes it a big financial responsibility. Missing mortgage payments, or in the worst case defaulting on your mortgage can leave you bankrupt and throw your financial future into turmoil.

For that reason taking out a mortgage is not a decision to be taken lightly or without completely thinking through your plans.

Some of the questions you should ask yourself when thinking of buying a home in Toronto or The GTA include:

–  Are you able to afford owning a home in Toronto & the GTA?

–  Can you continue to make mortgage payments even after a change in income?

–  Do you have the financial means to put in a good enough down payment to support the rest of the costs needed to be payed?

–   Is your current debt a heavy burden?

–   Would it benefit you to wait for more favourable market conditions or until you have more savings?

–   Have you considered ALL of the costs associated with buying a house?

–   What kind of a mortgage should you take out?

If you’re seeking advice on buying your first house in Toronto & the GTA, Frank Leo & Associates would be more than happy to provide expert guidance. FOLLOW HERE TO CONTACT US or Call (416)917-5466.

Financing Your First House in Toronto & The GTA If You’re a Millennial

Many millennials think of the Toronto & GTA Real Estate market and wonder if they’ll ever be able to afford a house. Although Toronto & the GTA house prices go up and down, the market is seen as inaccessible to young people in much of millennial culture.

An image showing personal finance calculations for someone thinking of buying a house in Toronto

In reality, many millennials could afford buying a house with a mortgage while taking advantage of some of the financial incentives the Government has instituted to help first time home-owners.

For example, the First-Time Home Buyer’s Credit (FTHBC) introduced by Revenue Canada in 2009 is a terrific place to start when it comes to easing the financial stress of buying a house in Toronto. If you’re a first-time homebuyer thinking of buying a house in Toronto check if you meet the requirements and whether the house qualifies for the credit.

The 15% income tax credit and other credits you may be eligible could mean the difference between affording the home and saving for a few more years.

Is It The Right Time To Buy A House in Toronto & the GTA?

Timing can play a big role when it comes to buying a house in Toronto. Determining when is the right time is a personal financial decision based on:

  • The conditions of the Toronto & GTA Real estate market. Houses could be exceptionally expensive or more affordable
  • Mortgage rates. Depending on the state of the mortgage industry, interest rates on the money you’re borrowing to buy a house could be relatively high or low
  • Your financial situation. Is it a good idea to buy now or save for a bit longer?
  • The Right House. Have you the perfect home for you?

There is no one-size-fits-all approach to answering these questions. It comes down to your current situation, your financial plans, and what your plans are for the future. When it comes to financial planning you can seek out the help of a professional, but in regard to any of your Toronto real estate questions you can count on Frank Leo & Associates.

Our award-winning real estate service has helped 1,000’s or people find their dream homes in Toronto & The GTA over three decades. Reach out to us to learn more about how we can help make your real estate dreams a reality.

Making Your Down Payment When Buying A House in Toronto & The GTA As A Millennial

In addition to other home-ownership costs, mortgage insurance is another expense you will have to pay on a monthly basis if you don’t own 20% equity. In practical terms, that means anyone buying a house who makes less than the traditional 20% down payment will have to buy this insurance.

Mortgage insurance protects the lender from losses if you are suddenly unable to make mortgage payments.

Making a larger down payment also means you start out with a higher share of equity in the property. Having more equity gives you more financial options in the future.

Remember the Stress Test

In order to be approved for a mortgage in Canada you need to undergo a financial stress test. As of October 17, 2016, this stress test is mandatory for all insured mortgages in Canada, even if you make a 20% down payment.

Historically this test only applied to people making a downpayment of less than 20%. These new rules were put in place to ensure that you can afford to keep making payments even if mortgage rates were to increase.

Image of a calliper measuring to determine if someone has enough cash when buying a home

In addition to qualifying for the rate provided by your lender, the stress test requires that you qualify for the Bank of Canada’s five-year fixed mortgage rate. The BOC’s rate acts as a sort of benchmark that gives an indication of your financial status to help prevent people from defaulting on their mortgages.  

This mandatory measure includes a requirement that as a home buyer you are not spending more than 39% of your income on home costs. Those costs include taxes, mortgage payments, utilities, etc.

Finally, your TDS (Total Debt Service) ratio cannot be over 44% and needs to include all other debt payments.

All of these conditions might seem like obstacles for millennials thinking of buying houses in Toronto. However, they’re there to prevent Canadians from falling into dire financial circumstances if their mortgage rates were to increase, unexpectedly.

Be aware of how your financial standing stacks up to the stress test requirements. Check where you stand before getting too invested in buying a house.

Get Informed About Toronto & The GTA Real Estate

Buying a home requires research, knowledge and an understanding of the home-buying process. Having insight and experience on your side is even better. Unfortunately it’s not as simple as just looking through Toronto & GTA real estate listings and picking a house.

Over 3 decades we’ve been helping people in Toronto & The GTA navigate the real estate market and we’ve developed an expert understanding of it.

That’s what makes us the #1 RE/MAX Team in Canada.* If you’d like the #1 Team on your side when navigating the home-buying process, we’re here for you.

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FOLLOW HERE TO GET INSIGHTS INTO INVESTING IN TORONTO & GTA REAL ESTATE

FOLLOW HERE TO READ ABOUT BUYING YOUR FIRST HOME IN TORONTO OR THE GTA

FOLLOW HERE TO LEARN ABOUT FINDING THE RIGHT REALTOR TO SELL YOUR HOME

 

Led by the #1 RE/MAX Agent in the world*, Frank Leo & Associates has helped 1000’s people in Toronto & The GTA navigate the real estate market.

That’s what makes us the #1 RE/MAX Team in Canada.**

Consider speaking with Frank and his team of associates help you navigating the home-buying process, FOLLOW HERE TO CONTACT US TODAY or Call (416)917-5466.

* Dollar Volume in 2017

** Dollar Volume  January – May 2018