You may think townhomes and condos are the same, there are many important distinctions between these two housing styles. In this article, we’ll break down the differences between a condo and a townhouse so you can make the right choice for your next home.
At its most basic, the following two rules apply:
- A condominium is always owned, and may or may not be classified as a townhouse.
- A townhouse may be owned, but it could also be a rental. And it may or may not be classified as a condominium.
Still confused? That’s OK. There are many options for first-time homebuyers, and these two types of homes overlap a bit in categories such as size, maintenance, outdoor space, homeowner association restrictions, fees, and financing options. Let’s explore the differences between a townhouse and a condo in more detail.
Condo vs. Townhouse
What is a condo?
- A condo is a component of a larger property, such as a four-story brownstone in which each unit is a condominium, or a large complex of apartments, like those found in urban high rises consisting of dozens or even hundreds of units.
- Condos typically have smaller square footage than townhouses and feel more like apartments.
- The condo owner is responsible for the care and maintenance of everything within his/her unit.
- Although you own your condo, you live in a building with the owners of all the other condos.
- Collectively, all condo owners own the exterior walls of the building and shared spaces inside and out. Together, they are responsible for the maintenance of these common areas (roof, hallways, lobbies, laundry rooms, exterior walls, fitness centers, pools, etc.). This is usually managed and financed by a homeowner association (HOA), which charges each unit a monthly fee.
- HOA fees in a condominium can be somewhat higher than in a townhouse because condos typically have more amenities.
- Both townhomes and condos may face HOA regulations, such as bicycle storage, the keeping of pets, hours of operation for fitness centers and pools, and availability of guest parking, are considerations for both condo and townhouse owners. Still, with more amenities typically available, condo owners may face more regulations.
- Owners of condos will have a proportionate share of the interest, ownership, and use of common areas but only pay property taxes on their individual units.
- Not having to maintain a yard is a key advantage for condo owners. However, outside space may be available at some properties in the form of common rooftop areas and smaller decks that are private to particular units.
What is a townhouse?
- A townhouse or townhome is a row of tall, narrow, nearly identical units, typically three or more floors. Some offer private garages.
- Townhouses share walls, but each unit is owned individually.
- Unlike condominiums, townhouses rarely have common areas. When a townhouse development does have common areas, they come in the form of parking areas, playgrounds, and landscaped pathways.
- Like condos, townhouses offer a close-knit living experience. Traditionally, townhomes were only found in cities, but now are built just about everywhere, especially along commuter routes and small towns.
- Townhouses may have small front and backyards and patios or decks. Owners handle the maintenance of these areas themselves, as they would with a detached single-family home.
- Because townhouses usually have multiple entrances/exits, they have safety and security concerns similar to a traditional detached home.
- A townhouse may not even have an HOA. Those that do will also have lower fees because there aren’t as many common amenities to maintain. They’ll also have fewer restrictions, although they are often less expensive and more lenient than those found at condominium complexes.
How financing differs between condos and townhomes.
When you work with a loan officer to get preapproved for a home loan, it will help to understand some of the differences between financing a condo and a townhouse.
Financing a condo:
You don’t own the land your condo sits on. This is the biggest financing difference between a condo and a townhome. You’re buying the space between the walls. That makes it possible for condos to be stacked on top of each other, making them perfect housing options in more expensive cities and densely-populated areas. Your loan officer will discuss with you all the ins-and-outs of applying for a Movement condo loan.
Financing a townhouse:
With a townhouse, you buy the home itself as well as the property the house is built on. Owning the land beneath your townhouse is the main reason they’re not stacked on top of each other like condominiums. Unless categorized as a condo by the seller, your loan officer will steer you toward a conventional mortgage product similar to one you would apply for when buying a single-family house.
Whether you want a condo or townhome, you must still have a good credit history and steady income to qualify for a home loan. Condos and townhouses also must meet the value during the appraisal.
These loans can be made more affordable by financing with a Fannie Mae or Freddie Mac program, with a VA loan for eligible military personnel, through FHA government financing or with the USDA rural home loan program. Ask your loan officer to tell you more.