Condo vs Townhome vs House

Also see related BLOG POSTS for more information

What is the difference in owning a condo or townhome compared to owning a house? The purchase price may be lower for a condo or townhome, but there are also association fees and restrictions. In reality, they are just different ways of assuming the responsibilities of homeownership. It can, however, have a bearing on the mortgage amount for which you qualify and some of the ways in which you live.

Association fees

When you buy a townhome or condominium you become part of a Common Interest Community (CIC) in a Planned Unit Development (PUD), which shares some of the responsibilities and costs of homeownership. Those shared costs are usually paid by each unit owner in monthly association fees.

Typically townhouse association fees include the following:

• Snow and lawn care
• Outside maintenance
• Sanitation (trash removal)
• Water/sewer (some include it, some don’t)
• Hazard insurance covering the building structure and exterior (you should secure your own separate insurance for the interior, much like renter’s insurance)

Condominium association fees usually include the above, plus some or all of the following...usually, the higher the fee the more is included:

• Heating
• Security system
• Shared amenities, such as a pool and exercise equipment
• Cable
• Air conditioning
• Electric

Association management

Associations are most often managed by a professional management company. However, some associations are self-managed by elected members of the community. Following are some questions you might ask about the association.

• Are there any pet restrictions?
• Do they have enough cash reserves to cover maintenance, etc?
• How do they pay for major improvements - from reserves from monthly fees or from special assessments?
• Are there any plans for any major improvements? What and when was the last major project, and how was it funded?
• Do they allow rentals?  If so, are there any restrictions and what percentage is currently rented?
• How is soundproofing between units?

If you decide to purchase a home in a Common Interest Community in Minnesota, you will have ten days to review the association documents to your satisfaction before your purchase agreement becomes binding.

Qualifying for your mortgage

When you are approved for a mortgage, you will be approved for a maximum monthly payment. If you are buying a house your maximum monthly payment typically includes homeowner’s insurance, but does not include the cost of utilities and maintenance. When you buy a townhouse or condo, your maximum monthly payment includes your association fee... which covers some, if not all, of your utility and maintenance costs.

This means the same approximate qualifying monthly payment will buy you a condo, townhome or house at different prices ranges...see the example below. Monthly payments were calculated with 3% down at 5.5% interest for 30 years. Association fees in the examples include all the items listed above for the condo and typical townhome inclusions listed above.

Total monthly home budget

Keep in mind that although your qualifying monthly payments are about the same, in this example the condo association payments include everything except telephone.  For the townhome example you must pay for your own gas, electric and cable.  When you own a house you are responsible for all utilities and maintenance. Following is a comparison of total estimated monthly costs.

The right fit

All three forms of ownership are good options...it’s a matter of finding the best fit for you. A house gives you more independence, but also greater responsibility. A condo or townhome has the security of more regular expenses and freedom from snow and lawn care, as well as outside maintenance.

CONDOMINIUM

• Most often one level in a multi-level building, shared entry and hallways, may have elevator
• Usually with security system, sometimes with onsite security guard and/or caretaker
• May have heated underground parking, parking in detached garages, assigned or unassigned open parking stalls or on-street parking only
• Most have party room, may also have shared amenities such as pool, exercise room, tennis courts
• Most association fees include heat, water/sewer, trash removal, snow/lawn care, outside maintenance and hazard insurance
• Some also include electric and/or cable
• Laundry more often shared, but may also be in unit
• Usually central heating plant

TOWNHOME

• Often multi-level, sometimes with basement
• Enter directly into unit from outside, own from the ground to the sky
• Usually have some sort of outside patio and/or deck area
• Garage usually attached
• Complexes can be large or small
• At least one side wall usually shared, back wall may be shared or open to the outside
• Most association fees include snow/lawn care, trash removal, outside maintenance and hazard insurance, some include water/sewer
• Usually responsible for own furnace, air conditioner and water heater

Also see blog posts...

• Condos - Townhomes - Associations - links to related blog posts
• Condo vs Townhome vs House
• No Dogs Allowed...about CIC association restrictions
• House vs Townhome vs Condo - Historical Market Overview
• Townhouse Styles, Part One - Detached and Quad/4 Corners
• Townhouse Styles, Part 2 - Side by Side
• Condo Styles