Condos and Debt: What Millennials Need to KnowApr 25, 2019
Have you worked hard to financially prepare yourself for buying your first home? Congratulations! This is a big step, especially since millennials face higher debt levels than ever before. But what is the right housing fit for your financial situation?
Now that you’ve saved up a down payment, passed the stress test and secured a mortgage, you can start shopping. There are options galore.
As a first-time buyer in a competitive market, a condominium may seem like the best choice. Condos are attractive for a number of reasons, especially for new buyers. First, they usually carry a lower mortgage, which can mean less debt and more room in your budget for savings goals. Of course, condos are also lower maintenance than a single-family home (no lawn care or snow removal).
But there’s more to know about owning a condominium.
If your budget is tight or you have multiple debt obligations — like student loan debt, ongoing credit card balances and bank loans — it’s important to know the differences between a condo and a house before making up your mind.
Here are a few things you should consider about condominiums:
– Condo options may vary, but one thing is certain: owners pay mandatory monthly fees for all of the perks and services provided to residents. These fees can be costly, and add to the debt load of first-time homeowners who may or may not have factored them in. You can’t opt out of condo fees, so you have to have the money available.
Missing options – Condos come with a lot of perks, but what about the things that aren’t included, like a designated parking spot for your guests or additional storage. If these options are available, they could come at an additional cost. Remember that each additional cost has to be factored into your monthly expenses. If you can’t afford the mortgage and fees with everything included, you’ll eventually end up taking on more debt.
Housing needs change over time – Remember, your lifestyle and family structure could change a lot. Will your future goals alter your housing needs, or your ability to carry a mortgage? It’s always good to think and plan ahead. If you already think you’ll outgrow a condo in a few years, then it might not be the right choice for you. There are usually financial consequences for breaking your mortgage early. Seller fees can put a strain on your finances. And if the housing market trends downward, you may end up having to sell your home for less than you paid.
Planning for emergencies – Even with a lower mortgage and more fixed expenses, a new homeowner still needs an emergency fund to manage financial setbacks, just like everyone else. Unplanned events like a job loss or illness are out of your control and can quickly impact your debt. Whether you buy a condo or a house, you need a plan so that you don’t wind up taking on debt that could overwhelm your finances. If you feel like you’re unable to make ends meet, or your debt has become overwhelming, a Licensed Insolvency Trustee can advise you on your options and help you find a way out.
Barry Choi at Money We Have talks about the expectations and surprises he encountered after buying his condo, and how it impacted his finances and debt.
Buying a home is one of biggest decisions you will make in your life. Condos can be the right choice for many first-time buyers, especially millennials who are working hard to make smart decisions about their debt. Just be sure you understand the pros and cons before you buy.
Are you weighing the pros and cons of owning a condo? Share your thoughts on Twitter. #FirstTimeBuyer #Millennial #LeaveDebtBehind