Bought a condo? How maintenance fees might affect your mortgage

Getting approved for your mortgage can be a very exciting step in your homeowner journey – you’ve passed the stress test and got a mortgage rate you can afford. Things might seem smooth sailing from here–but if you’ve purchased a condo, don’t forget that there’s one additional large cost you’ll need to factor in for as long as you own the unit: maintenance fees

What are maintenance fees?

Maintenance fees, also known as condo fees, are a monthly amount you pay to the condo corporation that is responsible for the upkeep of your building. These fees help to cover costs for building cleaning, landscaping, amenities, concierge staff, and general maintenance in your building. Once you take possession of your condo, you’re required to pay maintenance fees on a monthly basis. How much your maintenance fees are going to cost depends on a few factors, including your condo size, the age of your building, the amenities, etc. Maintenance fees factor in your square footage, so the larger your condo unit, the higher your fees. 

For example, in 2022, the average maintenance fee cost for condos in Toronto was 64 cents per sq. ft. That means that if you purchase a 700 sq. ft condo in Toronto, you’ll be paying about $448 a month on maintenance fees alone. While Toronto has some of the highest maintenance fees in Canada, you’re still looking at paying a couple hundred each month in other cities across the country.

Generally speaking, the newer the condo the lower the maintenance fees–and the older the condo, the higher they are. 

That’s why it’s also beneficial to look for condos with a high reserve fund, so you know you won’t have your maintenance fees raised exponentially each year. 

A look at how the monthly costs add-up

Knowing how much maintenance fees can run might have you re-evaluating your budget. The most expensive cost when purchasing a home is your mortgage. Maintenance fees in many cases follow as the second highest. And then you have property taxes, utilities, home insurance, and any other miscellaneous costs that might come up in the month. 

How do I know if I can afford a condo?

So how do you know if you can really afford a condo? This can be calculated using the GDS ratio, also known as the Gross Debt Service formula. This formula is sometimes used by lenders to see how your monthly income measures up against your projected monthly costs. 

The key here is to keep this number below 39% in order for the condo to be considered affordable based on your income. 

It’s important to read the status certificate

While you’re figuring out exactly how much maintenance fees might cost you for your particular unit, you can get ahead of the game before you even purchase your home. 

While shopping for a condo, either during the browsing period or the offer period, you can request for a copy of the condo’s status certificate. 

A status certificate is a report provided by the condo corporation that provides all the details about the condo’s current financial situation. It will indicate the condo’s reserve fund, which indicates how much money the building has to pay for any unexpected repairs related to maintenance, or any ongoing lawsuits. 

Budgeting is key to win against maintenance fees

Maintenance fees can be a big weight on your monthly budget in addition to your mortgage payments. Not to mention that these fees can increase on a yearly basis through the condo board. It could be the deciding factor on being able to afford a condo and having an effect on your mortgage payments in the long-term. Because of this, it’s important to do your research and create a budget before deciding to make your condo purchase. 

And if you have any questions about your mortgage or are getting started in your housing search, one of Pine’s mortgage advisors would be happy to speak with you.