Choosing your first place to live: should you rent, buy a condo or buy a house?
For your first steps onto the housing market, what route will you take? Rent an apartment, buy a single-family home, or buy a condominium unit?
Each option has its advantages and its limitations when it comes to financial aspects, maintenance costs, the length of your commitment, and quality of life. Read on and compare them!
| APARTMENT | HOUSE | CONDOMINIUM UNIT |
|---|---|---|---|
Financial aspects | |||
+ | – You won’t have to pay school or municipal taxes, and there is no down payment required. Note, however, that the owner is entitled to ask for one month’s rent in advance. – Generally speaking, apartments are available for all budgets. If you live in a major urban centre, you’ll have even more choice. | – Over the long term, the increase in value of your home and the repayment of the principal on your mortgage loan will bring you greater financial independence.
| – Co-ownership is a good way to enter the real estate market for the first time. The price of a condo unit is often lower than for a single-family home.
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- | – You will never see any return on the money you pay in rent.
| – The first years are the most difficult. The cost of the initial investment, and the monthly payments, will surely have an impact on your lifestyle. – If you invest in renovations, the value of your home won’t necessarily increase. | – The building is managed collectively, so you can’t control everything: some situations could lead to an increase or a decrease in the value of your condominium.
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Tips | – Use the money you save by paying rent to invest or finance other projects. A tenant who makes RRSP contributions, for example, can withdraw some of that money to make a down payment on a first home purchase. Under the Home Buyer’s Plan, you can withdraw up to $25,000 from an RRSP. – As a tenant, you’re advised to take out home insurance. It should cover your property against theft and fire, as well as accidental damage to a third party (water damage, for example). | – To find out what category of house or condo unit you can afford, you’ll need to estimate your financial capacity. Complete a budget table to assess your monthly expenses and your ability to pay back a mortgage loan. – Don’t place too much trust in the pre-approved mortgage loan amount that your financial institution provides. The price of your new house or condo should be at least 20% lower.
– Plan for the costs related to the purchase transaction: pre-purchase inspection, notary fees, transfer or “welcome” tax, mortgage life insurance, moving costs, home insurance, etc.
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| APARTMENT | HOUSE | CONDOMINIUM UNIT |
|---|---|---|---|
Length of commitment | |||
+ | – You’re only committing for a one-year period. You can even transfer the lease, or sublet the apartment (note that in the latter case, you are responsible if anything happens).
| – A mortgage is a long-term loan, often repayable over 20 or 25 years. The term, i.e., the length of time that the interest rate is in effect, is usually 5 years. There are also variable-rate mortgage loans. – You can reduce the length of the term by increasing the amount of your payments (using the accelerated payment option) or by making early repayments. | |
- | – You may like your apartment, but living there for a long time is never a sure thing: the owner is allowed to ask for it back in some situations (e.g., so that a relative can live there). | – Regardless of the type of repayment you choose, you need to leave yourself room to manoeuvre in case mortgage rates rise.
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Maintenance expenses | |||
+ | – You don’t have to worry about building maintenance.
| – A roof covering that requires replacing, a backyard in need of some TLC… When you become a homeowner, you inherit responsibility for maintaining the house and the land it’s built on. If you enjoy working with your hands, or building management, no problem!
| – Maintenance of a co-owned property involves mostly your private portions (essentially, the condo unit itself).
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- | – You must keep your apartment clean and in good condition.
| – For some people, home maintenance can turn out be a hassle. Before embarking on this venture, make sure you’re ready!
| – You’ll need to adapt to co-existing with other co-owners, and do your share when it comes to the management and common costs of the property. |
Tips | – Ask the landlord for permission before doing any decorating in your apartment (e.g., painting, adding mouldings or shelves). | – If you’re a CAA-Quebec member, consult Residential Advisory Services with any questions about maintaining your home.
| – Attend the annual general meetings to make sure the contingency fund is being properly managed. At issue: the ability to pay for all work necessary to maintain the building in good condition. |
| APARTMENT | HOUSE | CONDOMINIUM UNIT |
|---|---|---|---|
Quality of life | |||
+ | – The short term of the lease and the relatively few responsibilities relative to the dwelling mean that you have a certain degree of freedom. | – If you own a single-family home, you have the freedom to decorate and make renovations, additions, etc., to your tastes.
| – Condo living sometimes means you can enjoy shared services or facilities (e.g., a gym) that you wouldn’t otherwise be able to afford.
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- | – Even if you decorate and furnish the space to your liking, you might never feel completely at home. The building bylaws may include rules about pets, use of common spaces, etc. – You may have to live with shortcomings in terms of heating, air conditioning or soundproofing. | – Your freedom to make changes to the land and the house itself is limited by various laws, such as the Quebec Construction Code and municipal bylaws.
| – You won’t exactly be “master of your own domain.” For one thing, you have to obey the building bylaws. For another, if you want to make changes that will have an impact on the common portions (or on the neighbourhood, on noise levels, etc.), you’ll need approval from the syndicate of co-owners. Note: Rental of condo units seems to be an increasingly common practice; relations among co-owners and tenants can sometimes be difficult. |
Tips | – If the cost of heating is included in the rent, but you feel the apartment isn’t warm enough, you can make your case to the landlord, with evidence supported by witnesses, as suggested on this page of the Régie du logement website.
| – Take the time to familiarize yourself with the neighbourhood: how close public services are, who the neighbours are, safety, noise levels… Don’t rush into a purchase: there will always be other opportunities! – Be sure to order an inspection of the house you’re interested in, by a professional who has the required training.
– Negotiating a home purchase requires good knowledge of the steps involved, from the promise to purchase to the signing of the agreement. Take the time to get well informed! – A prospective buyer who needs help finding properties and negotiating with sellers can retain the services of a real estate broker. Once the transaction is made, the buyer’s broker and the seller’s broker share the commission on the sale. | – Never sign an offer to purchase a condo without making a proper inspection a condition of purchase and studying certain documents (e.g., title of the property, most recent financial statements) – Study the contingency fund and the list of major work required in the future. If the fund is insufficient to cover the required renovations, the condominium fees will likely skyrocket. The law says that at least 5% of the condo fees collected should go to the budget for the common portions, but most experts believe that a minimum of 10% is more realistic.
– During the inspection, be sure to check how well the unit is soundproofed. If the unit is near a stairwell, garbage chute or parking garage, you may find it inconvenient.
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