If you’re currently renting an apartment, you may be wondering whether it’s a good idea to buy a unit of your own.
To do so, you would need to find a condominium. While an apartment building is owned by a group of investors or firms, condo units are each owned by individuals. Rather than paying rent on an apartment, you’ll never own, you could put the money towards mortgage payments.
There are many things to consider here. Choosing between buying a condo or renting an apartment comes down to a number of factors. But one of the main reasons for buying a condo is to save money. With rent increasing at an incredible pace, it is becoming extremely expensive to stay in an apartment.
Determining whether owning a condo can save you money comes down to a number of factors, not just what you’ll be paying on a monthly basis. Here are some of the things to consider.
The property market is cooling…
While rent is still increasing, the price of the property is going down. For this reason, many people are optimistic that they’ll find condos at great prices. Instead of spending a lot of money on renting an apartment, they can spend less and actually own a place.
…but mortgage rates are high
However, it is also true that mortgage rates are particularly high right now. As such, even a cheap condo will come with high monthly mortgage payments. You may end up paying significantly more than you would have on an expensive condo a year ago when rates were still low.
Condos come with fees
Another factor to take into account is that you won’t only be paying your mortgage on a monthly basis. You’ll also be paying condo fees. These payments go towards the use of common areas and their upkeep, as well as the condo board or HOA.
Condo fees can push the monthly price point up significantly. When you rent an apartment, on the other hand, you are only paying rent and utilities.
Rent will rise
Just because your mortgage payments and condo fees are currently more expensive than rent doesn’t mean you will save by renting. It is inevitable that rent will rise over the years. In some years, the increase will be in line with your new salary. In other years, however, your landlord may have reason to raise the rent beyond what you can afford.
When you buy a condo, your mortgage fees are fixed. The condo fees may rise over time, but they will remain in line with the benefits you’re receiving. Within a few years, your mortgage payments will be significantly less than what you would be paying on rent.
Cash in hand
Another factor to take into account when considering the affordability of a condo is the money you will spend upfront. You will need to pay a deposit as well as transfer fees. This will amount to thousands, if not tens of thousands, of dollars.
You are getting value for that money, as it goes towards owning your condo. However, it is money that could be invested and grow while you rent an apartment instead.
How much do you value homeownership?
Ultimately, however, the main consideration when determining whether a condo is affordable is how much value you place on homeownership.
If you do not have ambitions to own your place, you may find the extra condo fees and the downpayment prohibitive. If, on the other hand, you are looking to own an asset while finding a place to settle long-term, those payments are worth it.
The calculations can get complicated when trying to determine how much money you can save by buying a condo. There is no simple answer, and it may come down to how much you want a place of your own.