Buying a condo is a big financial decision and takes months, if not years, of planning. Many factors can come into play, but the first thing you have to ask yourself is why.
Why are you buying? Are you investing in a condo to turn it into a rental property and to sell it off later, or do you want to put money in a condo so that you’d have a place to live in the foreseeable future?
Why choose a condo? You could opt for a house and lot, but there must be a reason you want to pursue getting a condo. Is it because of the amenities? The accessibility? The security? The proximity to places that you already frequent?
You also have to consider the possibility of not being fit for condo living. Some people are like that — they love the idea of living in the heart of the big city but become claustrophobic when they realize how limiting and confining a condo’s space can be, even with the outdoor amenities.
One way to find out if you’re compatible with condo living is to try renting one first. In your first year of renting, you’ll know if you can handle living by the condo association’s by-laws (house rules that each condo corporation abides by), if you can adapt to the condo’s space, and if the Homeowners Association is to your liking.
Before you can say you’re ready to commit to a condo, here are the financial and lifestyle aspects that you need to think over.
Money matters when buying a condo
When buying a condo unit, it’s important to consider where you stand financially. Owning property is an expensive and long-term investment, and there are many considerations before fully committing to it.
Income stability is essential when investing in a condo, as you need to make sure you can afford the regular payments and the additional costs of owning one (more on this later).
Some developers will require you to meet a certain threshold for your monthly income. When you’ve paid off the down payment, your monthly amortization will be subject to change, depending on the interest rate and type of financing you get approved.
Say, for example, you’re paying P12,000 per month for 24 months for your unit’s down payment until turnover. You would typically pay off only 10-20% of the total contract price, and you can loan the remaining 80-90% through either bank or in-house financing.
Bank financing offers competitive interest rates, which can be good for the buyer, but be aware that your monthly payments can vary because of this. For example, you could be paying anywhere from P30,000 over twenty years or P50,000 over five years, and these figures can fluctuate if the interest rates change when your loan is repriced.
Track your budget
Inflation is something that you should factor into your budget when you’re looking to buy a condo. As the cost of living increases, you should be working on securing a higher income to ensure you can keep up with your monthly payments.
Financial experts also advise allowing only 30% of your income to go to monthly payments for your home. Keep this in mind when you’re shopping for property.
Credit score and financial fluidity
Credit ratings aren’t something that many of us pay attention to in the Philippines unless you’re trying to get a credit card or apply for a housing loan. In this case, it’s very important! Because if you’re looking to take out a housing loan, most developers recommend bank loans as they offer lower interest rates compared to other forms of financing.
But what happens if you get declined for a housing loan? This isn’t to say that you will, but it does happen, and many buyers aren’t financially prepared or fluid enough to shell out large amounts of money to pay for the condo.
If you don’t want to pay higher interest rates through other financing options, it’s highly suggested to build a good relationship with your bank and get pre-approved for a loan before you’re due to take it out.
What else should you pay?
Earlier, we mentioned that there are other costs associated with condo ownership. But this also goes for property in general.
Payments don’t stop at the monthly amortization — before you even sign the paperwork, you need to pay the developer a reservation fee, which can go up to P30,000, depending on the project. The reservation fee is non-refundable and will be deducted from the total contract price of your condo unit.
You also need to pay closing fees (varies per developer), electric and water connection lines (this also varies per developer), annual real estate property taxes, maintenance and repair costs to your unit, condo association fees, and membership fees to the Homeowner’s Association.
Condo association fees are also not fixed and can vary depending on your unit size. Parking slots also come with their own reservation fees, association dues, and property taxes.
Is the condo life for me?
Let’s say that you tick all the boxes and you’re financially ready to jump into buying a condo.
Condo living can be ideal for singles, couples, and even small families — but this is highly subjective. Before you start looking for condos, ask yourself:
- What are the pros and cons of buying a condo in this specific area?
- Will I want to live here permanently, or is this only for convenience?
- Am I okay with having such a limited space?
- Would I be okay with living according to the condo’s rules?
- Are the people here to my liking?
When you’re renting, it’s easy to just pack your bags and get out if you’re not a fan of the community. But condo owners don’t have the privilege of just up and leaving — after all, they’ve made an investment in the property.
As a condo owner, it’s your responsibility to deal with problems that come up with your Homeowners’ Association or figure out how to make the limited space that you have fit just right.
You also have to think about what your condo can offer you. Are the amenities worth the price you’re paying? Do the services provided by the condominium corporation meet your standards?
Do your due diligence
Before you even think about writing a cheque or initiating a bank transfer to reserve your condo, be sure to do your due diligence and research well on the property.
Remember that property investments are long-term and expensive commitments, and you can’t back out if you change your mind. (Well, you can, but it’s going to be expensive and time-consuming!)
Once you’ve thought long and hard about your next step and you decide that you’re ready to make the big investment decision, partnering with real estate experts is the next way to go.
DMCI Homes Property Advisors are a team of professionals that can help you, from finding the right property within your budget to giving you the best practical advice so that you don’t struggle with making your monthly payments.
Ready for #PropertyDoneProperly? Talk to your DMCI Homes Property Advisor.