Condo Considerations

What you need to know when it comes to financing.

Condos are an affordable option considered by many first time home buyers. However, what many aren’t aware of is that they can be more complicated than a single family home when it comes to qualifying for a mortgage and securing financing.

When you purchase a condo, the investment involves not only your unit, but the condo corporation as a whole. The condo corp needs to be in good standing for a lender to be comfortable approving your mortgage.

What should I be looking for?

Are the financials up to date?

• Banks typically will not finance a property without up to date financial statements.

Are there any pending special assessments?

• Outstanding Special Assessments can be a big problem for lenders. For example:  If your condo requires a new roof right away and there isn’t enough money in the reserve fund to cover the costs of this expense – the condo will issue a special assessment. The bill will be divided between all of the units in the building accordingly and each owner will be responsible for coming up with their share of the costs.  Unfortunately, even if you are able to pay your share of this assessment, it doesn’t guarantee that all of the other unit owners will be able to pay their share. If not, the required maintenance may not happen. Often times you will not be able to secure financing until these assessments are fully collected, assuring the lender that the needed repairs to the building now can and will be done.

Is the condo board self-governed?

• For a self directed condo board, the lending options can be more limited. Not all lenders are comfortable with this, however there are still options. This can be fairly common place in smaller condos with only a few units.

Post Tension Cables?

• Post tension cables are sometimes used to reinforce concrete during a condominiums construction. If properly installed and maintained there are typically no issues,  however if not properly maintained they  can corrode and result in very expensive repairs. As such , not all lenders and insurers will finance these properties.  If your condo was built using post tension cables you may be limited in your lender and insurer options. You can also expect that recent engineer reports will be requested at the time of purchase to confirm that they are in good standing.

Age Restrictions?

• Certain properties can come with age restrictions. For example there are building catering to seniors / 55+. CMHC will not insure age restricted properties, and many lenders will also shy away. Not only is the lending option pool reduced, but also the pool of potential qualified buyers if and when the property needs to be sold. Resale value is a key component in mortgage approvals for lenders.

Flood Damage?

• If your condo was in a flood zone , you can expect the lender to do some detective work. They will want to ensure any and all water damage has been fully remediated and will likely request a recent engineers report to confirm the property is structurally sound.

High Percentage Of Rental Units In The Building?

• Without a stake in the property,  rental tenants do not have a vested interest in how the condo is run, kept clean and in good repair. This is also something the banks will look at when deciding to approve or decline a mortgage application. If the condo has a high percentage of rental units and minimal owner occupied suites – this can result in a decline.

If you have any questions or concerns, I would love to hear from you. Cory Lewis – Jencor Mortgage