First-time home buyer looking at Condo - Need advice!

[2heaven]

Hi,

Over the last little while, I've been reading a lot about condos/mortgage topics/threads on the forums and realized that I needed help in making my decision on a potential buy. I've talked to a couple agents but wanted to get some unbaised advice if possible.

My background-
UW Engineering grad
~60k income (3300/monthly net + RRSP contributions)
~10k RRSP (all my savings are currently going into max this out)
~5k TFSA
~1k savings
4k motorcycle
renting @ 500/month
car+insurance 300/month (~450/month with gas)
no other significant expenses

The condo-
1bed + den, 1.5 bath @ ~700 sqft
square one/city centre area, Mississauga
~235k - reason I'm even considering is because it's $30k less than builder promotional price
0.37/sqft condo fee
utilities - hydro extra
incl. parking + locker

I'd be dropping a deposit on the condo now and moving in when it's fully built probably sometime 2010. Note that I would delay my occupancy as long as possible to reduce the occupancy fees before registration.

I just want some different perspectives from intelligent/educated but mostly financially conscious/frugal people regarding my current situation. I don't NEED to own, but would like to especially if the deal is right. The question is though, am I financially ready to buy?

Also, in particular I am concerned about the housing/condo market and what the chances are that I'm making a huge mistakes that's gonna cause me to lose (tens of?) thousands of dollars.

Thanks in advance!

[clock]

Do you have other money/liquidity now aside from your RRSP/TSFA and $1000 saving?

If not, you can't really afford to buy a house now as most builder will require 15-20% deposit within 180 days of you signing the paper. (5% of now, 5% in 30/60/90 days, 5% in 180days)

Which means you need to have 35-45K ready in 6 months.
Your income is definitely enough to afford a 250K house if you have 20%+ downpayment.

No one knows what's gonna happen to housing prices in a few years. That's just a risk all homeowners have to take. But if you are not planning to sell the house in a few years, how much your house's price went up or down is just a paper gain anyway. Your mortgage payment & your income won't change because the market price went up or down.

Just make your own financial plan and stick to it.

[Narci]

One thing you might want to do is make an excel spreadsheet with your monthly expenses.

Then include different scenarios.

The different scnearios I used was: (all this was monthly)

What if my wife was on mat leave.
Interest calculations up to 7%(one for 3%, one for 4% one for 5% etc)
Different downpayment scenarios
25 vs 35 year scenarios

Things to not forget:
HST on a new condo if close after July 1st.
Closing costs
CMHC if under 20% downpayment
Maint fee and maint fee increases
Food cost
Gas
cable
phone
Vacation
savings
furniture
entertainment

I'm sure others can add more.

[lofidelity]

I would say that you better make sure that you will have enough to cover the 20% down payment as previously mentioned. The other thing is to make sure that this place is a good buy at $235k since some newer condos in the Square One area built recently are valued at $200k for similar square footage.

Other than that, I think you should be in a good financial position to buy, since your costs are very low. You seem to be getting quite a bargain if you are renting for $500/month!

Of course if your costs are so low, why would you want to move to a mortgage so soon? You can continue to contribute to RRSPs and invest the rest of the money while you wait and see where the real estate market will go.

[Jucius Maximus]

Make sure you read my thread: Condo buyers should consider these items (http://www.redflagdeals.com/forums/showthread.php?t=591356) :D

Also note:
1. Your condo fee WILL go up, no doubt about it. It always does as the developer wants to bring them in low to draw buyers.

2. Don't believe the completion date. Depending on the builder it could take months and even close to a year beyond that before you can actually move in.

3. Make sure you get a lawyer specializing in condo closings to look at the contract BEFORE you sign.

[sunny923]

Make sure you read my thread: Condo buyers should consider these items (http://www.redflagdeals.com/forums/showthread.php?t=591356) :D

Also note:
1. Your condo fee WILL go up, no doubt about it. It always does as the developer wants to bring them in low to draw buyers.

2. Don't believe the completion date. Depending on the builder it could take months and even close to a year beyond that before you can actually move in.

3. Make sure you get a lawyer specializing in condo closings to look at the contract BEFORE you sign.

+1, really good advice...

[-=phelan=-]

yes get a lawyer to take a look at it before you sign. Ask for the offer sheet prior to walking into that office.

In addition, i'd be wary about where you're going to park that motorcycle of yours as being a fellow motorcyclist i'm kinda of skeptical about condo garage security.

[2heaven]

Do you have other money/liquidity now aside from your RRSP/TSFA and $1000 saving?

If not, you can't really afford to buy a house now as most builder will require 15-20% deposit within 180 days of you signing the paper. (5% of now, 5% in 30/60/90 days, 5% in 180days)

This is where my problem lies. I'm not buying from the builder and have enough for the initial downpayment of 10% at signing. However, in order for me to have money/liguidity set aside after the downpayment to be on the safe side, I may need to borrow (from either family or LOC).

HST on a new condo if close after July 1st.

Isn't there a rebate that essentially removes this extra cost if the home is under $400k?

CMHC if under 20% downpayment

I plan to have at least the 20% by occupancy.

Of course if your costs are so low, why would you want to move to a mortgage so soon? You can continue to contribute to RRSPs and invest the rest of the money while you wait and see where the real estate market will go.

I do want my own (nice) place instead of renting cheap apartments - which is what I am doing to save money for my own home. I guess I am concerned that if I don't get something now while the market is a bit down I'm going to miss out on a good opportunity.

2. Don't believe the completion date. Depending on the builder it could take months and even close to a year beyond that before you can actually move in.

The building has already began construction. The builder is saying 2nd/3rd quarter 2010, but I expect occupancy for later 2010 at the earliest.

3. Make sure you get a lawyer specializing in condo closings to look at the contract BEFORE you sign.

Agree, great advice. Thanks!

[VivienM]

I guess I am concerned that if I don't get something now while the market is a bit down I'm going to miss out on a good opportunity.

That assumes that you believe the idea that "the market is a bit down". I suspect we could have a long flame war about that :)

[Narci]

Isn't there a rebate that essentially removes this extra cost if the home is under $400k?

That's to cover the land transfer tax only. I don't think it covers lawyer fees.

[2heaven]

That assumes that you believe the idea that "the market is a bit down". I suspect we could have a long flame war about that :)

Haha, yes... But you can't argue that due to the recession, the housing market didn't get shaken up - although it's hard to say that it's really been down relative to what could have happened or happen in the near future.

That's to cover the land transfer tax only. I don't think it covers lawyer fees.

I'm kind of confused but what you mean here. I'm a first-time buyer so I could possibly be exempt from the land transfer tax. When you said HST, I thought you meant the harmonized sales tax which there is a rebate for (up to 75% - correct me if I'm wrong) which I would be eligible for since the home is under $400k.

[adamtheman]

I bought a pre-sale condo and would never do it again. Buying new isn't for me, especially after watching all the design shows on HGTV and seeing how nicely old apartments can be fixed up. I would rather buy an old condo and modify it to my needs. There may be things in your new condo you don't like. I know when I moved into my new condo I found that even though it showed good, after living in it I discovered things which annoyed me, like I didn't like the cabinets (not deep enough), the appliances were all stainless steel whirlpool (sounds great on paper), but they were the lowest models and none of them worked properly (fridge didn't keep stuff cool in hot weather, dishwasher didn't clean, microwave didn't cook evenly, etc.). I also didn't like the toilet, and the laminate hardwood was garbage. The lights on the ceiling were not really nice. The tiles were uneven in more places than they should have been. Anyways you get the point. If I had rebuilt a condo myself, I would have put in nice hardwood floors, top of the line appliances, better granite, better tiles, etc. Problem is you can't do that with a newer condo because taking a brand new toilet out or replacing a brand new floor isn't cost efficient, so I just sold the condo and now I am renting. Anyways good luck in whatever you choose.

[lazertazer]

House is better than a condo

[ginko123]

House is better than a condo

+1 with the HST coming in July, condo ownership will sky rocket ...there's a chatter already everywhere on media.:(

[2heaven]

+1 with the HST coming in July, condo ownership will sky rocket ...there's a chatter already everywhere on media.:(

Hmm, I did not know about this. Thanks - keep the info coming!

It seems, I'm going to have to seriously reconsider this. I might be better off just continuing to rent and save save save until I can afford a really nice house.

[speedyforme]

Hmm, I did not know about this. Thanks - keep the info coming!

It seems, I'm going to have to seriously reconsider this. I might be better off just continuing to rent and save save save until I can afford a really nice house.

There are some really decent freehold townhomes out west in Miss near Erin Mills/Winston Churchill.

Look at Private Sale to save some money. I saw a recent ForSaleByOwner end unit freehold townhome that sold for less than $310k or so and it was NICE inside.

[VivienM]

Haha, yes... But you can't argue that due to the recession, the housing market didn't get shaken up - although it's hard to say that it's really been down relative to what could have happened or happen in the near future.

See, I think real estate is overpriced, and that (like cars, too, which sell based on long 0% loans), the prices are artificially propped up by low interest rates.

Once interest rates rise, whoooops.

[jerrysiz]

It seems, I'm going to have to seriously reconsider this. I might be better off just continuing to rent and save save save until I can afford a really nice house.

Well, do you want a house? Do you want a condo? Would you be happy to continue renting if you weren't being told you were missing out on some really great deal?

You need to make sure that you're not looking at this just from an investment point of view. That's the surest way to end up miserable when you're living in what you buy. This is going to be your home. Yes, you need to be informed and make sure you can afford what you buy. But if (for example) you like the idea of the condo lifestyle, don't rush to buy a house because you hear the HST will increase condo fees. Look at it this way...let's say your condo fees rise 50% after a year (they are guranteed at the builder's quote until the condo is registered usually ~a year), with the projected increase to condo fees estimated at ~6% due to the HST, you'll be paying about $23 more a month. Not great, sure, but how much should it influence your decision? The same with lawyer's fees, so with the HST you'll pay, what, $70-$80 more for a one-time cost? And? I know when I was buying my place I tended to go into a panic every time someone shared their opinion with me about what would make the best investment. The problem being, of course, that everyone has a different opinion on what that would be, which can quickly drive you nuts if you're not careful. You know the old saying, opinions are like...well you know ;)

Make sure to do your research (real research, not just polling us anonymous folk on messageboards, though it is a good start).

Be really sure you like what you are going to buy. Or you will hate living there, no matter how great an investment it may be.

Make really sure you can fully afford what you are going to buy (all the costs) and don't get caught with your pants down (Jucius Maximus gave you some great advice about this early in this thread, ignore it at your peril :)).

If you want my opinion (and you'll recall my warning above about putting too much stock in random people's opinions), I think you need to do a lot more research before you even think about buying. This "great deal" may pass you by, but there are always going to be more great deals out there, don't ever rush into anything (agents and builders thrive on getting people to make bad decisions under pressure). I would save up a lot more for a down payment, at least enough so you can avoid having to get insurance, and enough that you can be sure you'll be able to enjoy living your life once you're a homeowner, instead of just working to pay off your huge mortgage with nothing left over for fun. In the meantime, think about what kind of lifestyle you want. Then when the time comes you can buy a house, condo, or even just continue renting if that's what's best for you. Good luck!

[2heaven]

Well, do you want a house? Do you want a condo? Would you be happy to continue renting if you weren't being told you were missing out on some really great deal?

You need to make sure that you're not looking at this just from an investment point of view. That's the surest way to end up miserable when you're living in what you buy. This is going to be your home. Yes, you need to be informed and make sure you can afford what you buy. But if (for example) you like the idea of the condo lifestyle, don't rush to buy a house because you hear the HST will increase condo fees. Look at it this way...let's say your condo fees rise 50% after a year (they are guranteed at the builder's quote until the condo is registered usually ~a year), with the projected increase to condo fees estimated at ~6% due to the HST, you'll be paying about $23 more a month. Not great, sure, but how much should it influence your decision? The same with lawyer's fees, so with the HST you'll pay, what, $70-$80 more for a one-time cost? And? I know when I was buying my place I tended to go into a panic every time someone shared their opinion with me about what would make the best investment. The problem being, of course, that everyone has a different opinion on what that would be, which can quickly drive you nuts if you're not careful. You know the old saying, opinions are like...well you know ;)

Make sure to do your research (real research, not just polling us anonymous folk on messageboards, though it is a good start).

Be really sure you like what you are going to buy. Or you will hate living there, no matter how great an investment it may be.

Make really sure you can fully afford what you are going to buy (all the costs) and don't get caught with your pants down (Jucius Maximus gave you some great advice about this early in this thread, ignore it at your peril :)).

If you want my opinion (and you'll recall my warning above about putting too much stock in random people's opinions), I think you need to do a lot more research before you even think about buying. This "great deal" may pass you by, but there are always going to be more great deals out there, don't ever rush into anything (agents and builders thrive on getting people to make bad decisions under pressure). I would save up a lot more for a down payment, at least enough so you can avoid having to get insurance, and enough that you can be sure you'll be able to enjoy living your life once you're a homeowner, instead of just working to pay off your huge mortgage with nothing left over for fun. In the meantime, think about what kind of lifestyle you want. Then when the time comes you can buy a house, condo, or even just continue renting if that's what's best for you. Good luck!

Thanks for the advice. I think for me, I'm just starting to get excited with the possibility of buying a nice place to live. To be honest, I am currently satisfied with what I have - like I said before, I just didn't want to let a good thing pass (the pressures of RFD?) :).

The biggest problem is that I have no experience in these purchases and the fact that this is a pre-con purchase is giving me worries. I would like the condo-lifestyle better (mid-20s atm) but like you said, I don't think I should rush into anything. For now, I'm just going to keep watching how things turn out housing/economy/my own finances and keep learning until I'm 100% I am getting what I want.