Planning to buy a Condo unit? Before you put in your reservation payment, it pays to know what the costs of owning a condominium will entail.
There are so many pre-selling condominiums in Manila that boasts of class a amenities, resort-hotel design and tempting zero percent downpayment installment schemes that seems easy on the pocket. Whether you are planning to buy one as your home or as a rental property investment, knowing and being prepared for all the costs that you will incur will prevent financial worries in the future.
Here are some of the common costs of owing a condominium unit in the Philippines:
Reservation Fee
If you want to purchase a residential condominium unit, the first step is to pay a reservation fee so that your chosen unit & floor will be put on hold for you. Typically the reservation fee ranges from Php20,000 to Php200,000 depending on the condominium development. The reservation fee is normally non-refundable but creditable to the downpayment.
Downpayment
After a few days, you will have to pay the downpayment. Your reservation payment will be deducted or credited to your downpayment. Normally, the downpayment is set at 20 or more percent of the Total Contract Price. You can choose to pay lump-sum or spread your payment into 12 to 60 months depending on the payment terms agreed on.
Balance
Upon turnover or a specified time, you will have to pay the balance. You can choose to pay in full, through bank financing or in-house financing. This is where many buyers get shocked. If you choose financing to pay for the balance, the amount is usually higher—- double or triple your monthly downpayment cash out. This is because the balance percentage is usually higher than the downpayment and you are also paying for principal and interest.
Mortgage Redemption Insurance
If you choose bank financing, they will require you to get Mortgage Redemption Insurance (MRI). This basically protects the lender in case accidental death happens to the borrower, the lender will still be paid by the insurance company. You may choose to get MRI from your bank or if you have an existing insurance policy which can cover the loan amount, you can opt to assign it for the loan. The bank becomes your beneficiary during the loan duration until you pay it off.
Closing / Turnover Costs / Transfer Fees
When you are about to receive your unit, you will be asked to pay for closing or turnover costs. This cost covers title transfers, doc stamps, real property tax payments and other miscellaneous fees. The computation of which is usually based on your unit size or total contract price. Some developers give discount incentives if you choose to pay this in advance.
Utility Security Deposit
You will be asked to pay for a refundable security deposit bond for Meralco. You may also have to pay for installation of other utilities you opt to have. This is usually charged during turnover of your unit.
Association Dues
Once your unit has been turned over to you, expect to be charged monthly association dues. Monthly association dues are computed based on the size of your condo unit. The monthly association dues are the fees you pay to keep the condo operational. It pays for the salaries of building administration personnel, cleaners, guards, gardeners, custodians. It pays for maintenance and upkeep of the building, facilities and amenities.
Common Area Utility Bills
Some building administrators include common area utility costs in the Association Dues but there are other condos that separate it. These are the monthly charges incurred for water and electricity in the common areas. This is normally calculated based on the size per square meter of your condo unit.
Recoupment Charges
In rare cases, the association dues collected may not be enough to cover the cost of running the condominium, its services, utilities or repairs and maintenance. If this happens, your building admin may charge recoupment fees which is an add-on cost on top of the association dues and computed based on your unit area.
Real Property Tax
When you buy a condo unit, expect to pay at least 2 Real Property Taxes: one for your unit and the other for the building, machineries and common areas. Most of the time, you will have to pay the Real Property Tax of your unit at city hall yourself. You can pay quarterly or yearly. If you pay yearly by December, you can get a good discount. If you pay late, expect to pay penalties. If you are paying for bank mortgage, ensure that your RPT is paid, otherwise, you might get shocked with the hefty penalties of late payments. Banks do not usually shoulder and process payment for the RPT.
Insurance
Your building administration will charge you for Insurance for building, common areas and machineries yearly. You may opt to get insurance for your condo unit too. If you have a bank mortgage, they usually require you to pay insurance premium for your unit too during your loan period aside from the MRI.
Optional Membership Fees for Select Amenities
Some condos charge fees for the use of amenities and function rooms. Others offer it free for a specified number of residents per unit. Before you purchase your condo unit, ask about planned policies of amenities.
Penalties
If you pay late, expect to be charged penalties. Building associations charge penalties because they need to ensure enough collections to properly fund the building operations. So be sure to pay on time.
These are are the common costs involved in buying and maintaining a condominium unit. Be an informed buyer to help you better prepare financially for these and to make your condo ownership journey more pleasant.
Jhoanna Gan So is the co-founder and President of Businessmaker Academy and HR Club Philippines. She is a Property Investor and Licensed Real Estate Broker (REB PRC # 0029553). She devotes most of her time to business education, real estate and her amazing family.