Condominiums can be the best housing option for homebuyers with a smaller budget and would want less burden for maintenance, repairs, security, and landscaping.
Whether you want to buy a condo as your first home or as an investment, owning a condo is a long-term commitment especially when you’re taking a loan to finance it. Normally, a lender will let you choose between a 15-year and 30-year repayment term. A long term would be the better choice for buyers who want a lower monthly payment while the short term saves the buyer a lot of interest in the long (or short) run. Take a look at the different types of 30-year loans and the condo’s qualifications before you commit to a loan package.
If you’ve got your heart set on a newly-built condo, you should be aware of a few steps that you should comply with to get a mortgage so you can buy it.
What Is a Condo?
A condominium is a property that you can purchase outright and it’s a hybrid between an apartment and a house. Condominiums have many similar features that you can get in apartment living. For example, condominium units are adjacent to each other so owners often share a wall or two with their neighbors and live just literally several steps away.
The main difference between a condominium and an apartment is that you can sell a condominium unit independently of the other units so investors regard it as real estate. Whether the building design resembles an apartment building or as detached units that look like single-family homes, it’s the community association that jointly owns and maintains the common areas such as yards, building exteriors, hallways and inside streets.
Is Condo More Attractive Than Typical Home?
Families may favor a condo over the typical single-family residence for different reasons. To know some of their differences, when it comes to ownership, private residences have individual private owners. Condominiums, on the other hand, have different joint owners and they are often the condominium residents or unit owners.
In the more expensive markets like the downtown areas, condos are highly popular because they are cheaper than single-family residences. For this reason, many homebuyers get the opportunity to enter and live in an area where they might not be able to afford a house. It’s also a feasible option than renting an apartment especially as a condo owner, you can build equity and even use your mortgage interest as tax deductions for your income tax.
Condos appeal to first-time homebuyers because of their affordability. For the retired, they are also popular since many condominium projects often provide services and facilities that cater to their special needs. Since condos often have common areas that all residents in the building own, there is a governing board that oversees the operations of the condominium community. These associations primarily manage the place and lay down (and implement) the rules and guidelines for the residents.
Pros and Cons of Buying a Condo
Here are the top advantages and a few disadvantages to help you in your decision-making process.
Cheaper. It’s much cheaper than buying a comparable single-family house. Condo costs will depend on the size of the home, the property values in the area and the cost of living in that particular city. You would normally need less money to purchase a condo but industry experts reveal that historical data show that single-family detached homes appreciate in value faster than condominiums.
Maintenance. If you don’t like yard work, gardening, tinkering in your garage-workshop or you’re all thumbs when it comes to maintenance, the condo world is your habitat where you don’t normally have opportunities for these things. Most condominium management hires professionals to do the landscaping, repaint the halls, maintain the exterior, etc. If something on the interior breaks, they will send someone over to fix it for you.
Security. Many condo complexes hire full-time security guards and install surveillance cameras or other security gadgets. For example, access to the parking garage will require a key card that they will issue only to legitimate residents. Sometimes, even the front door and elevators will only work if you have an access card or key. Although many condos are in urban areas, the extra security measures give the residents an extra peace of mind that you won’t normally have in an independent single-family home.
Amenities. It’s possible that you can afford to buy a single-family home but unlikely that you’ll be able to install your own backyard swimming pool and a personal gym. Most condominium communities have various amenities for the residents such as pools, tennis courts, jogging paths, mini-parks and clubhouses that residents can use without worrying about cleaning them or fixing them. Having a gym alone is worth a lot because you can use it anytime without having to pay the usual minimum membership fee of $50/month.
The condo price isn’t all you will have to worry about. The mortgage payments and appreciation rate aren’t all you have to consider. You should include the association dues.
Resale. Selling a condo is much harder than selling a home because, well…what makes your unit different from the other identical units in the building? If you have the best view or in the quietest area of the building, it may add some selling points. It’s easy to know how much to ask for your unit because you can always compare your price with the other units in the community.
You can’t choose who your neighbor will be. Even if you’re the extrovert in the family, it can be tough sometimes to get along well with neighbors. In a condo community setting, the community board or association is the governing body that sets the rules. You would probably have rules about pets, visitors, use of shared facilities, etc. If homeownership to you means being able to do what you want with your space (like placing plant boxes beside your front door), a condominium may not be the best home for you.
Storage. If you used to live in a small apartment, moving into a condo may not give you ‘space’ problems. But if you’re moving in from a four-bedroom house with a two-car garage and a shed in the back, the condo space may not be enough even for just your furniture. Some condo communities would provide communal bike storage and maybe even individual storage shed on the roof – but it won’t compare to the same usable space that you used to enjoy in your old house.
Fees. To keep the common areas in their tip-top shape and looks, the condominium association must pay professionals to maintain them. Where will they get the money to pay for this? From the residents, of course, who will have to shell out a few hundred dollars a month in association dues.
ABOUT THE AUTHOR
Baruch Silvermann is a personal finance expert, investor for more than 15 years, digital marketer and founder of The Smart Investor. But above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.