When considering what kind of home you want to buy, it’s important to know the difference between a condo and townhouse. Many people use the term “condo” to refer to an apartment-style home and “townhouse” to refer to a multi-story attached property. However, the word condo, short for condominium, actually refers to a type of ownership.
In this article, we’ll explore condo vs. townhouse, including the types of ownership and the pros and cons of townhouses and condos.
What is a townhouse vs. a condo?
To understand what is a condo vs. townhouse, some definitions are helpful.
A condominium is a type of property ownership where you own your unit up to the interior walls. All owners in the condominium association hold common or joint ownership in the rest of the building — including the exterior walls, roof, hallways, and elevators. The association members also own all the property’s common areas, such as the amenities, parking lot, and the land the community is built on.
A townhouse is a style of building in which at least three single-family dwelling units are attached in a row. Each unit extends from the roof to the foundation, so no one lives above or below another owner’s unit. Townhouses also have open space on at least two sides, so you have a private entrance rather than living off a hallway.
While both apartment-style units and townhouse units can have a condominium style of ownership, many townhouses aren’t condominiums. Instead, homeowners also own the property their unit is built on and perhaps a small yard, so it’s similar to owning a detached home. Owners in the townhouse community may have a homeowners association that manages common property.
When you’re shopping for a home, be sure you understand the type of ownership involved before making an offer.
Differences between a condo and townhouse
Condo and townhouse differences cover a range of issues that you’ll have to consider as a homebuyer. Depending on your circumstances or preferences, one might be a better fit than the other.
When you buy a condo, you own the interior of your unit, and you’re responsible for maintaining it. You’re also a joint owner of the common areas and amenities, and you’ll have to pay monthly fees for upkeep on those common areas.
With a townhouse, you own your unit, including the exterior walls and the land it’s built on. Your land may also include a front yard, back yard, and possibly a side yard if you have an end unit. The community may also have common areas, and you’ll pay a portion of their upkeep.
The condo vs. townhouse mortgage situation presents clear differences when it comes to financing.
It’s typically more difficult to get financing for a condo, which is seen as a bigger risk than other kinds of residential property. Mortgage agencies such as the Federal Housing Administration (FHA) impose additional requirements on condominiums. To qualify for FHA financing, the community must be primarily residential, meet insurance and financial reserve requirements, and be free of legal issues or other matters that could affect your ability to resell the property in the future. The Department of Housing and Urban Development maintains a searchable list of FHA-approved condos.
If you’re considering a regular townhouse, the lender doesn’t have to follow those requirements, so the mortgage process is simpler. However, if the townhouse community has a homeowners association (HOA), it’s wise to investigate the association’s financial situation before deciding to buy. If the HOA doesn’t have ample reserves, you may face a special assessment if the community encounters unexpected expenses.
Condos tend to be cheaper to buy because they don’t include land, unlike a townhouse or single-family home. The median sales price for a condo sold in February 2022 was $305,400, compared with $363,800 for single-family homes and townhouses, according to data from the National Association of Realtors.
Condo prices also may not rise as fast. Median sale prices for condos rose by 10.9% between February 2021 and February 2022, while prices for single-family homes and townhomes went up 15.5% in the same period.
Individual condo vs. townhouse resale value will vary based on factors such as the size of the unit, the location, how well the home has been maintained and updated, and community upkeep and amenities.
Costs and fees
While a condo may have a lower initial cost compared to a townhouse, it typically has higher HOA fees. Condo association fees cover maintenance, taxes, and insurance for all common areas and property within the complex. Many condo communities have extensive amenities such as a gym, pool, and lobby area, which can result in large monthly fees for owners.
Townhouse owners often pay more to buy their home, including its land. They are responsible for maintaining their house and usually their yard. Since the community isn’t responsible for as much maintenance, townhouse HOA fees are typically lower than condo fees.
You pay monthly condo or townhouse HOA charges directly to the HOA. Your lender doesn’t escrow the money the way it collects a portion of your real estate taxes with each monthly payment. Ask how much the monthly HOA fee is and add it to your monthly budget to determine whether you can afford the property.
Because condo owners own just the interior of their unit, they only need insurance for that space; the HOA maintains insurance on the entire building. A typical condo insurance policy will cover repairs to the unit’s interior if it’s damaged by a covered peril, personal property that’s stolen or damaged, and personal liability if someone is injured while visiting the unit. The policy covers less than a homeowners insurance policy, so premiums are lower.
Townhouse insurance is the same as a homeowners policy, covering the structure as well as the contents, so the premiums are higher than for a condo.
Both condos and townhouse communities can have HOAs, but HOAs tend to be stronger in a condo.
HOAs are like a mini government that makes the rules for the condo community. Condo owners elect the board, which manages the property and enforces the rules. The HOA collects dues or assessments to pay for maintenance, taxes, insurance, and other shared expenses.
There’s less common property in a townhouse community, so the HOA generally has less power and a much lower budget.
Rules and restrictions
Condos tend to have more rules and restrictions than townhouses have. For example, condo rules may limit the size or number of pets allowed, restrict your ability to rent out the unit, or set limits on noise and activity.
There are clear differences in privacy when considering a condo vs. townhouse. Condo life is similar to living in an apartment building. You may have neighbors above, below, and on both sides of your unit, with more across the hall.
In a townhouse, you have more privacy. No one lives below or above your unit, and you may have a private backyard.
One area where condos typically shine is amenities. Condo communities may feature a range of shared amenities, such as a swimming pool, tennis or basketball courts, a gym area, and landscaped common areas.
Townhouse communities tend to have fewer amenities than condos.
Condo vs. townhouse: pros and cons
If you’re considering buying a townhouse vs. condo, it’s important to weigh the pros and cons of each option.
|Condo||More affordable||High HOA fees|
|More amenities||Restrictive rules|
|Less maintenance||Less privacy|
|Opportunities to socialize||Limited storage space|
|Townhouse||More privacy||Less affordable|
|Yard space||More maintenance|
|Fewer community rules||Limited parking|
|Higher resale value||Fewer amenities|
To decide between a condo vs. a townhouse, think about what’s important to your lifestyle. If you like having amenities close by, socializing with lots of neighbors, and don’t want to have to deal with much home maintenance, a condo might be the right choice for you. On the other hand, if you prefer more privacy, want a small yard for your pets or kids, and don’t mind handling maintenance and yard work, you may enjoy living in a townhouse.
If you’re basing the townhouse vs. condo decision solely on financial issues, a condo can be a good choice for affordability. However, a townhouse may pay off in the future with better appreciation and a higher resale price.
Are you ready to begin your home search? Talk to a local Finance of America Mortgage Advisor today to learn more about your options.