Considerations When Deciding Between a House or Condo
Posted by Niels Madsen on
When choosing the type of property you want to purchase, you’ll be bombarded with many different choices. You need to consider a variety of factors, such as the size of the property, features like if you want your own yard or if a management company handles any of the outdoor/community upkeep, and the types of financing available to purchase the property.
With the increase in buildings being constructed, there is a varied choice of whether to purchase a house or a condo. Note that this blog is talking about a condo, and not an apartment, as technically an apartment is a rental unit, whereas while a condo exists in a building with other units, it is individually owned.
It’s not just the technical label, but there are lots of other technical and practical aspects to deciding between a house and a condo, which will be discussed here.
As mentioned in the intro, an apartment building, even a luxury complex, is made up of units for rent. The inhabitants don’t own them and a landlord or management company handles the upkeep of the unit. Owning a condo has a few of the same benefits as living in an apartment complex, but the inhabitant owns the unit.
In a condo complex, there may still be some community spaces, like a clubhouse, gardening space, playground and/or other outdoor spaces, landscaping, and trash removal, that require a monthly fee from condo owners in the complex.
This isn’t rent.
These are services and spaces you pay to use, as you would if your condo was in a gated housing community.
Typical Home Ownership
Typically, purchasing a house involves a “freehold” title and this type of ownership is considered the simplest by most buyers. In the case of a freehold title, the property owner retains control of the building and the property.
This means you can knock the whole thing down and rebuild, add things to the property, choose the type of landscaping you want, and anything else that also complies with the rules and regulations set for homeowners in your region.
If you’ve found a house that has many good qualities but isn’t quite perfect, the benefit of ownership means you can do whatever drastic changes you want to it (in accordance to local by-laws)!
Types of Condo Ownership
There are a couple of different ways this can happen, but it’s not usually a freehold title like you’d have for a house. Since a condo is part of a larger complex, the types of mortgages are different.
The Strata Title
This type of title refers to the ownership of an individual unit on a larger property. It also usually includes the use of common areas, property, parking, and services. Note that these are not ironclad or specific in every strata title. Only the exclusive ownership on one unit in the larger strata lot is under contract.
Instead of a management company, your complex may be owned by a company in which you own shares. This is a less common form of condo ownership and allows each person who owns shares in the company to own a section of a property, with one unit in which to reside.
Getting a Mortgage
Consider the amount you can put into a down payment, the amount you’ll have to borrow, the time you’ll be paying off the mortgage, and the interest rate you’ll have to pay. Typically a condo will cost less than a house, but it’s not a guarantee, as it depends on the location and size of the property.
Conventional vs. High Ratio Mortgage
A conventional mortgage allows the borrower a loan that may be up to 75% of the value of the home, but a high ratio mortgage allows the borrower a loan that is over 75% of the value of the home.
The big difference is that with a high ratio mortgage, there’s more risk to the lender so you as the buyer will have to pay for mortgage insurance in addition to the actual mortgage payment.
Finding Out How Much You Can Borrow
Don’t always take the word of the first lender you contact. It’s important that you compile estimates from several different lenders so that you can compare all the factors involved with what you can afford.
Determine your budget by compiling all of your resources and all of your expenses. This may include insurance payments, interest on your mortgage, savings for incidentals, purchasing new furniture, upgrading or replacing appliances, and (if you choose to purchase a condo) a monthly fee for services and community property usage.
Insurance Requirements for Property Ownership
Home owner’s insurance is not always required for homeownership, but with a condo, it likely will be. In a condo complex, there are many units in one single building, and this close contact means that if there’s flooding, a fire, or other issues that can cause serious damage could damage nearby or attached units.
When it comes to owning a larger property that’s not part of a condo complex, homeowners insurance may not be required but is still prudent. Your property is an investment and insurance protects that investment.
Other Things to Consider
Living in a condo can be a luxurious experience. You have the use of community property that often includes a clubhouse or garden that you don’t have to upkeep. There are also neighbors close by and a social aspect to living in a more populous area, where condo buildings almost always reside.
On the other hand, you may not want neighbors close by and a house with a garden in a more secluded area might seem peaceful and luxurious in its own way. Houses that aren’t part of a condo building can be in rural areas that have neighbors far away and offer the ownership of a larger property. You’ll also have to upkeep everything on your own, which means extra expenses.
In the end, you’ll need to consider your own personal preferences, what you can afford, how long you plan to live there, and if you plan to resell the property for profit when you move. Either way, owning property is an investment that offers the chance to recoup expenses, whereas rentals don’t.
If you’re ready to start your property journey, whether it be for a house or a condo, at Madsen Langlois we can help you find the perfect property for your needs.