Source for this article: https://www.ratesupermarket.ca
It’s one of the most debated questions in real estate. But the truth is, in real estate, the “better buy” is always whichever option is best for your lifestyle and your budget. Determining what that option maybe seems like a daunting task, but you can easily decide on what’s right for you by reflecting and asking yourself two simple questions.
What does my lifestyle require?
Condos and houses have different advantages and disadvantages, but it’s pretty easy to identify which you may be more comfortable over the other.
Condo buyers usually love being close to entertainment or work, don’t want to spend much time on maintenance, and don’t mind sharing common areas. At one point, the typical condo buyer was younger, and perhaps buying this condo as their first home and using it as a stepping stone towards a house. But today, empty nesters and older couples hoping to downsize are also major condo fans.
On the other hand, the typical house buyer wants more space or more privacy. They want more leeway to personalize their home, and they can spend the time – and/or money – on maintenance. They may be willing to commute longer to work to live in the house they want.
What fits my finances?
The overall cost of a condo versus a house can vary greatly. Though the costs per square foot in a house and condo may be similar, a condo’s ticket price is still less than a house. However, it should be noted that condos are increasing in price faster than a house. According to research done by Royal LePage, the median price for a condo in Canada at the close of 2017 was $420,000, versus $522,000 for a house.
Moreover, maintenance fees can be less with a condo versus a house, and easier to budget for since they’re a set monthly cost (so no scrambling for cash if your furnace breaks down in February!).
But one thing both condo and house buyers must consider is the new mortgage regulations set by the Office of the Superintendent of Financial Institutions Canada (OSFI). Canada’s new minimum qualifying rate for uninsured mortgages means that purchasing power is reduced and homebuyers may not be able to afford the same home they wanted last year. Another Royal LePage study even found that the average peak millennial’s purchasing power in Canada was reduced by about $40,000 since the introduction of the new rules.
Advice for home buyers if…
You’re worried interest rates will rise
Mortgage rates are affected by various things, but the number-one determining factor is the Bank of Canada overnight rate. The Bank has hiked its key interest rate three times in the last year by a total of 75 basis points. And as of recent, forecasters are predicting another BoC increase by mid-summer.
And with the U.S. Federal Reserve expected to make three or four rate increases in 2018, homebuyers should brace themselves for the BoC to follow suit. Even an increase by one-quarter point could mean a home buyer currently making mortgage payments of $3,340 per month will pay and extra $1,092 a year.
This leads to why OSFI deems the new stress test necessary. Homebuyers should not be left completely empty-handed after making their mortgage payment. They should still have enough for unexpected and ongoing expenses and be financially prepared if, in fact, mortgage rates increase. But if you are concerned about your finances should rates increase, talk to your lender about a fixed-rate mortgage.
You’re nervous about getting into a bidding war
Although sale prices have seen some reduction in early 2018, the supply of homes for sale is also expected to remain low, which could mean competition running high. Be prepared before you house-hunt: check your credit score, decide on your down payment, and shop around for a pre-approval on your mortgage to know how much you can afford. As long as you are honest with yourself and know how high you can go before going into a deal, the stresses of a bidding war can only go so far.
Advice for condo buyers if…
You’re torn between buying a pre-construction condo or a resale
A resale, or existing, condo may be your best buy for a few reasons. If you’re into creating your dream home from scratch and making modifications, then a pre-construction unit may seem appealing. Pre-construction projects are also prone to delays by months or even years, so it could be the right option if you have the patience and you’re not in a rush to move in.
On the other hand, pre-construction condos used to cost less than existing condos in the same neighbourhood, but lately, pre-construction prices are matching and sometimes exceeding the price of existing condos. Also, if you plan on renting out your condo, you could be missing out on months – or years – of rent, waiting for your unit to be ready.
You want a condo, but you also want your space
Older condos – those usually 10-years-old or older – tend to be larger than condos built more recently. The downside? They most likely will have fewer amenities.
You’ve heard of pre-construction condo plans being cancelled, and you’re worried
Between 2012 and 2017, 23 condo projects were cancelled in the Greater Toronto Area due to zoning issues or recent rises in construction costs. In addition, in case of bankruptcy, purchasers of pre-construction homes are low on the list of those to be reimbursed. So what to do? Before you purchase, check the track record of the developer, and its record for finishing projects on schedule and on budget. Tarion Warranty Corporation has an online searchable database or you can look for outstanding liens online and review the developer’s history through the Canadian Legal Information Institute.
Source for this article: https://www.ratesupermarket.ca/