It is not hard to see why condos continue to be the purchase of choice for first-time home buyers. Not only are they definitely easier on the pocket book they offer a low maintenance lifestyle which can be hard to ignore. However, purchasing a condo does have some additional considerations to be aware of before signing on as an owner. The challenge is that these other aspects of condo ownership are not easy to understand, and come complete with a language of their own. This terminology, added with all of the other industry jargon, can often cause confusion and frustration for first-time buyers, in fact even the name “condo” is often misunderstood.

The word “condominium” refers to a form of legal ownership, not a style of construction. While most buyers tend to think of a condominium as a high rise apartment complex, this type of ownership can be extended to low rise buildings, townhouse complexes and believe it or not, some single family homes as well.

The ownership of a condo consists of two parts: firstly the individual unit, which is owned exclusively by the purchaser, and secondly, a shared ownership in all common areas of the building or complex, such as the lobby, hallways, elevators, fitness facilities, parking and landscaping outdoors.

To cover the ongoing costs involved in managing and maintaining the common areas, a monthly condo fee is charged to all owners. Most condo fees are determined by the square footage of the unit, although some are just a flat rate. As this monthly fee is set by the condo board it is neither optional nor negotiable. Additionally, like most expenses it will most likely increase over time.

Condo fees are used to finance many aspects of ownership within the condominium. Some of these expenses include day-to-day care of the common areas, property management fees, some utilities and an ongoing contribution to the reserve fund.

The reserve fund is set up by the condominium management to cover the cost of major repairs and necessary replacements over time. Costs such as roofing or window replacement would fall under the intended use of the reserve fund. In the event that the reserve fund falls short of covering a necessary expense, each owner could be given a special assessment charge. These special assessments may be payable as a one-time lump fee and depending on the financial need of the condominium, these assessments can be extremely costly. Beware of developments that have significantly lower monthly condo fees than other similar properties, as this can be a sign of poor management and under-funding, which might cost you much more later.

Another challenge when looking to purchase a condo is that lenders vary policies surrounding what they will and will not finance. It is not uncommon for a lender to prefer one type of building style over another.

If you are considering purchasing a condo in the near future it is even more important to have a clear understanding of what you are truly pre-qualified to purchase, beyond just the maximum approval amount. Square footage and property specifics are just two of the points that could come up after you’ve found that perfect condo, which you may wish you had known up front.

To ensure that your condo purchase is a great buying decision, both in the short and long term, it is best to work with a team of professionals who are experienced with the finer details of condos. A great mortgage broker is certainly a key member of that team. Call today to see if condo ownership makes sense for you.

Sharon Essington is a Mortgage Consultant with Canada Mortgage Direct. Sharon specializes in providing an innovative approach to mortgage financing for individuals looking to improve their lives through real estate. To request a copy of your FREE report “Buy Sooner with No Money Down”, or for more information on this topic, call 1-866-376-8250.