Buying a condo involves unique mortgage considerations that don't apply to freehold houses. Understanding these differences helps you navigate the process smoothly and avoid surprises.
Key Differences: Condo vs. House Mortgages
| Factor | Condo | House |
|---|---|---|
| Condo fees | Included in qualification | N/A |
| Status certificate | Required for approval | N/A |
| Building approval | Lender may restrict | Generally not an issue |
| Insurance | Building + personal | Homeowner's only |
| Appraisal focus | Unit AND building health | Property only |
How Condo Fees Affect Qualification
Condo fees (maintenance fees) are included in your Gross Debt Service (GDS) ratio:
GDS Calculation with Condo:
(Mortgage P&I + Property Tax + Heat + 50% Condo Fee) ÷ Gross Income
Impact on Borrowing Power:
| Monthly Condo Fee | Reduction in Mortgage Qualification |
|---|---|
| $300 | ~$60,000 less |
| $500 | ~$100,000 less |
| $700 | ~$140,000 less |
| $1,000 | ~$200,000 less |
The trade-off: Higher condo fees reduce borrowing power but often include utilities, maintenance, and amenities you'd pay for separately in a house.
Status Certificate: Your Due Diligence Document
The status certificate reveals the condo corporation's financial and legal health:
What It Contains
| Section | What to Look For |
|---|---|
| Reserve fund | Adequately funded? (Industry benchmark: $2,500+/unit) |
| Special assessments | Any upcoming or recent? |
| Legal issues | Ongoing litigation? |
| Budget | Balanced? Surplus or deficit? |
| Rules/bylaws | Any restrictions on rental, pets, etc? |
| Meeting minutes | Major issues discussed? |
Red Flags
- Reserve fund under $1,000/unit
- Upcoming special assessments
- Active litigation against corporation
- Multiple increases to condo fees
- Deferred maintenance items
- High percentage of rental units (lender concern)
Finance Your Condo Purchase
Get pre-approved today with a team that understands condo-specific financing requirements.
Building Restrictions: Know Before You Shop
Some buildings have lender restrictions:
Common Restrictions
| Issue | Lender Response |
|---|---|
| Building over 4 storeys wood frame | Some lenders won't lend |
| High rental percentage (35%+) | Higher down payment required |
| Commercial percentage high | Limited lender options |
| Previous flood/fire damage | Case-by-case |
| Pending major repairs | May delay approval |
| Building under 1 year old | Some restrictions |
CMHC Restrictions
For insured mortgages (under 20% down):
- Building must be complete and occupied
- Reserve fund study required
- Maximum rental percentage limits
- Age and condition requirements
Condo Fee Considerations
What's Typically Included
- Building insurance
- Common area maintenance
- Reserve fund contributions
- Water (sometimes)
- Heat (sometimes, especially older buildings)
- Amenities (gym, pool, concierge)
What's Usually Extra
- Unit contents insurance (required by lender)
- Hydro/electricity
- Internet/cable
- Parking (sometimes)
- Storage locker (sometimes)
The "Right" Condo Fee
| Fee Level | What It Might Mean |
|---|---|
| Very low (<$300) | Underfunded reserve, minimal amenities |
| Moderate ($400-$600) | Typical well-managed building |
| Higher ($700+) | More amenities, older building, or utilities included |
Warning: Very low condo fees often mean special assessments are coming. Check the reserve fund carefully.
Condo Insurance Requirements
Building Insurance (Corporation)
Covers the structure itself. Not your responsibility.
Unit Insurance (Your Responsibility)
Lender requires:
- Contents insurance
- Personal liability
- Unit improvements/betterments
- Gap coverage (if applicable)
Typical cost: $25-$75/month
FAQ
Q: Can I get CMHC insurance on a condo?
A: Yes, same rules as houses—5% minimum down on homes under $500K. However, the building must meet CMHC criteria.
Q: What if the building has a special assessment?
A: Depends on the amount and purpose. Small assessments rarely affect approval. Large assessments may require the seller to pay before closing or affect your financing.
Q: How do condo fees affect my payment?
A: They don't directly increase your mortgage payment, but lenders consider them when qualifying you. Your total monthly housing cost includes both mortgage AND condo fees.
Q: Can I rent out my condo unit?
A: Check the building's rules. Some condos restrict rentals. High rental percentages can also affect future buyers' financing options.
Q: What if I want to buy in a new building?
A: Pre-construction has different considerations—see our new construction mortgage guide.
What's Next
Condo purchases require specialized knowledge. Get pre-approved with our team who understands condo-specific requirements and can guide you through status certificate review and building approval.
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