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Condo Vs. Townhouse: How Do They Differ?

Molly Grace8-Minute Read
August 24, 2020

The difference between a condo and a townhouse is not always as obvious to the casual observer as some might think. Both types of residences come in all sorts of shapes, sizes and structures, so it isn’t always as simple as looking at the exterior of the building or where it’s located.

Ultimately, the determining factor in whether a home is a condo or a townhouse is what exactly the homeowner owns. Let’s take a look at what that means and go over things to think about if you’re considering which type of dwelling best suits your needs.

Condo Vs. Townhouse: What Do I Own?

The most important difference between a condo and a townhouse is that owners of condos only own the space inside their units while townhouse owners own the interior and exterior of their homes, including the land the home sits on and any other structures on that land, though they share one or more walls with neighboring townhouses.

These terms refer to what is owned, not the stylistic differences commonly referred to when discussing these home types. For example, when you hear the word “condo” you may picture a high-rise apartment building in a dense urban area, but a collection of attached, single-story homes in a suburban community could also be classified as condos. And while townhouses often take the shape of long rows of attached, multi-story homes that line the streets, the defining feature is that they’re attached to at least one other adjacent home – beyond that, they can be quite varied in how they look.

For reference, both of these types of homes are different from a detached single-family home, which is what you might first picture when you think about traditional homeownership. These homes are free-standing structures – meaning they aren’t attached to another home – that accommodate one household.

Condo Vs. Townhouse: What Are My Responsibilities?

Because ownership is structured so differently with condos and townhouses, what a homeowner is responsible for varies quite a bit.

If you’re shopping for a new home and deciding between a condo and a townhouse, it’s important that you understand the responsibilities that come with each. Depending on which one you pick, you could either end up being financially and legally responsible for a lot more than you anticipated, or you could end up with a lot less control over your home than you’d like.

With condo ownership, you’re responsible for everything within your unit. Everything else, including upkeep and repairs of the building’s exterior and common areas, is the responsibility of the homeowners association (HOA).

For example, if you accidentally run a hammer through your drywall while trying to hang a picture, you’d be responsible for patching up the hole. But if a falling tree damages the roof of the building, the HOA will pay for its repair – either by dipping into its reserve fund (money the association has saved up to pay for unexpected costs) or by requiring everyone in the HOA community to pay a “special assessment” outside of their monthly HOA fees to cover the cost.

If you’re looking to have the benefits of homeownership while avoiding some of the bigger financial burdens – big, exterior repairs can seriously eat into a homeowner’s budget – a condo can be a great option. Just keep in mind that condo owners sometimes have fewer freedoms and less privacy than owners of townhouses or detached homes.

Owning a townhouse is closer to owning a detached single-family home in terms of who is responsible for what. While you’ll still be part of an HOA that will maintain common areas in the community, you’ll have more responsibilities when it comes to maintenance and repairs.

When you buy a townhouse, you’re responsible for the interior and exterior of the home as well as the land it’s on. That means if you have a yard, you’ll do the mowing and landscaping. If the deck needs repairing, you’ll hire the contractor. If the roof has a leak, that comes out of your pocket.

Both townhouse and condo HOAs may take care of things like garbage pickup, plowing the streets in the winter or other similar services. They’ll also oversee and pay for upkeep of common spaces such as a pool, gym or clubhouse. Exactly what an HOA covers will vary from community to community – be sure to read up on the bylaws before purchasing in an HOA-governed community so you know exactly what you’re getting.

Condo Vs. Townhouse: Which Costs More?

There are a few different ways your overall costs will vary depending on whether you buy a condo or a townhome. If you’re considering which of the two might best suit your finances, you’ll want to think about purchase price, HOA fees, maintenance costs and homeowners insurance.

Purchase Price

Two of the biggest factors in determining a home’s cost are square footage and location. Because you’re usually purchasing more space with a townhouse than a condo, a townhouse will typically cost more.

However, location is also a big part of it. If you’re deciding between a condo in the heart of a popular city and a townhouse located in the suburbs, the townhouse may cost less. But in general, because you’re only buying the inside of the unit rather than an entire home, you can expect condos to be cheaper.

However, condos tend to come with slightly higher mortgage interest rates.

HOA Fees

Because condo HOAs play a much bigger part in the upkeep of the community, a condo owner is likely to pay higher HOA fees than a townhouse owner. Condos may also have more amenities than a townhouse, which can also contribute to higher fees.

Condo owners also should be prepared for the possibility of a hike in HOA costs if the association assesses additional fees for unexpected costs. While any HOA-governed community has to watch out for these special assessments, condo associations have a much wider scope of responsibility, and thus may be more prone to needing additional funds to make necessary repairs.

Because townhouse owners bear the majority of the responsibility when it comes to maintenance and repairs, HOA fees for townhouses tend to be lower. However, the cost will ultimately come down to the needs of each individual community.

Maintenance Costs

The flip side of having lower HOA fees, of course, is having higher maintenance costs. Condo owners pay their HOA to take care of both the regular and unexpected costs of maintaining a residence. For townhouse owners, that responsibility falls solely to them – and their wallets.

As a rule of thumb, homeowners are advised to have at least 1% of their home’s value set aside each year for maintenance and repair costs. Townhouse buyers should keep this in mind when considering the long-term affordability of their prospective home purchase.

Homeowners Insurance

Condos are usually cheaper to insure than townhouses. After all, homeowners insurance on a condo only needs to cover the interior of the unit; the HOA will have its own policy that covers the exterior of the building and any common areas.

With a townhouse, you’re insuring the entire home: interior, exterior and land. If you plan to purchase a homeowners insurance policy for your townhouse (which is a requirement if you’re financing the purchase with a mortgage), be prepared for it to cost about as much as it would if you were buying a detached home of a similar size.

Condo Vs. Townhouse: Other Considerations

Here are some additional things to think about as you navigate the question of “condo or townhouse?”

Financing

Depending on the type of loan you’re getting and how you intend to use the property (as a primary residence, vacation home or investment property), the mortgage approval process for a condo is typically more complex than it is with other home types, including townhomes.

To get a mortgage on a condo, it’s not just you and your finances that has to pass muster with the lender – the larger condo complex and its governing association has to, too.

There are a variety of situations that can make mortgage approval on a condo difficult or even impossible, like if more than half of the owners within the condo association own their units as investment properties rather than primary or secondary residences. Associations that are involved in ongoing litigation or have a large number of delinquencies can also be a red flag for lenders.

Privacy

Townhouses are generally going to be more private than condos, though neither will be quite as private as a detached home.

With a townhouse, you may have your own yard, and thus an outdoor space that belongs just to you – meaning you’ll be able to garden or barbeque in peace. If a condo has any outdoor living areas, it will usually be shared by the entire community.

You also won’t have to worry about having (or being) a loud upstairs neighbor with a townhouse. However, the shared wall of a townhouse can also be a nuisance in terms of noise and privacy.

Apartment-style condos will be surrounded by other units, and all the noises and activity that comes with that. For example, if you want to be able to take your dog out for her early morning potty break in your PJs without having to make small talk with your neighbors, this type of condo might not be the best choice for you.

With both types of dwellings, the amount of privacy you’ll have will depend a lot on the physical structure of the complex or community. Some condos may offer a lot of privacy, while some townhouses may provide very little.

Restrictions

How many restrictions you’ll have to deal with will ultimately depend on your HOA. While some condos may have relatively restrictive rules, townhouses can also come with their fair share of dos and don’ts that homeowners are required to follow.

Which one is “better” in terms of restrictions might come down to what matters to you.

For example, many condos have restrictions on pets. They might dictate the number, type, size and breed that you can keep in your home with you. If you’re a dog person and a condo only allows cats, you’ll probably want to look for another place to live.

Condos may also have restrictions on things that can be nuisances for others. If you like to play loud music, throw wild parties or you’re a smoker, you might have a harder time finding a condo association that suits your lifestyle.

On the other hand, townhouse association rules may prove stifling for those who want a home with a little more personality.

Often, HOAs in these types of communities want to ensure the uniformity of all of the homes within them. This can mean you’re limited in how much you can change the exterior – you might even need approval just to paint your front door a slightly different color.

These communities may also have strict rules on lawn maintenance, landscaping and even gardening.

In summary, HOAs can be very restrictive, very lax or somewhere in between whether you’re in a condo or a townhouse.

Resale Value

The resale value of a home depends both on how well the property has been maintained and what the market is doing.

Neither type of home is inherently more valuable, though condos do come with a significant risk when it comes to holding value – much of the maintenance and upkeep is out of your control. If your HOA decides to let common spaces fall into disrepair, that can turn off buyers – even if your individual unit is pristine.

Remember, too, that getting a mortgage for a condo comes with additional stipulations, and if something happens that makes the property ineligible for financing, that can limit your potential buyer pool to just cash buyers.

Amenities

Though townhouses can also exist in communities with amenities such as a pool or fitness center, these types of additions are typically more common with condos.

Keep in mind that the more amenities a community offers, the higher your HOA fees will be. Some high-end condos may offer amenities such as concierge services, rooftop decks, retail spaces such as coffee shops or boutiques, yoga studios or formal dining rooms with private chefs.

If a community’s amenities are important to you, you may find more success with a condo rather than a townhouse. Just remember that those amenities come at a cost.

Summary: Know What You’re Buying

There’s no one-size-fits-all; both of these home types each come with their own pros and cons. A condo may make sense for one person but be a terrible fit for another – same goes with townhouses. It’s all about what suits you, your needs and your finances.

If you’re planning on buying a new home soon, be sure to check out the Rocket Homes Real Estate LLC blog’s educational resources so that when the time comes, you’re ready and knowledgeable.

Get the right home loan for you.

Molly Grace

Molly Grace is a staff writer focusing on mortgages, personal finance and homeownership. She has a B.A. in journalism from Indiana University. You can follow her on Twitter @themollygrace.