Learn More About Townhomes and Condos

If you’re looking to become a homeowner, buying a townhome or condo could be a good option. Popular among first-time homebuyers as well as plenty of second and third homeowners, townhomes and condos offer a diverse and unique lifestyle that can be as comfortable, luxurious, and relaxing as owning a single-familty home and even has some added benefits. Nevertheless, before you go shopping for the perfect townhome or condo, it’s vital that you understand exactly what they entail and the ownership differneces of owning each.

The Difference Between Townhomes and Condos 

A townhome is similar to a traditional home, except that they are connected through communal walls, usually two walls but sometimes only one if you are purchasing an end-unit which are more desired. Traditionally, townhomes have a front and backdoor that leads directly out of the property but sometimes they may have backdoors to shared areas such as hallways, covered garages or underground parking and some even include an attached garage, but this is based on the development and/or area you are purchasing in. Townhomes usually tend to be at least two stories, though it’s not uncommon to find units that are have more, especially in crowded cities. Like condos, townhomes usually have a homeowners association or HOA. If an HOA is present, the association will usually handle maintenance costs for the communal areas and keeping the grounds manicured.

A condo is similar, however there are some key differences. Usually, condos are one-floor units which can be located on different levels within a development and may offer more amenities. Like townhomes, residents of condos also own them outright but they usually don’t have the same control over their exteriors. They are allowed to do whatever they like with the inside of their condos, but the exterior, which may include the lawn, windows and doors, of their unit is owned by the HOA and the association has a say in the cosmetic appearance of the building as it needs to conform to all of the units in the complex or development.

Determinine if a Townhome and Condo is For You

One of the main draws of a townhomes and condos is that they’re usually more affordable than traditional homes. While much of this is because they tend to be smaller and usually lack yards, the tradeoff is that you can buy them with plenty of space and they include amenities, which is an attractive selling point for many buyers. Those who have a busy lifestyle and/or don’t want to deal with the responsibility, maintenance & some of the utility costs of owning a single-family home tend to prefer townhomes and condos as a great alternative. Overall, less can go wrong with a townhome or condo, so you don’t need the same amount of funds set aside for emergencies that may occur with the dwelling.

Another attractive selling point about buying a townhome or condo is enjoying the benefits of homeownership while living in or near a big city. Whether it is for commuting purposes to work or a lifestyle choice, purchasing a single-family home in New Jersey usually means living out in a suburb as many of the homes developed in the state are post-war tract homes. There are tradeoffs to different types of properties, however a single-family home usually means a longer work commute or drives on a regular basis. If you decide to buy a townhome or condo, the benefit it that you should have a wider selection of finding one within a close proximity or walking distance to your favorite amenities in your selected area.

As far as downsides, with both townhomes and condos, financing can be a challenge or is restricted in some ways as the loan guidelines for these types of properties are underwritten differently from a loan for a single-family home. Sometimes you may need to work with specific lenders well versed in these types of purchases as some lenders won’t fund or offer this type of mortgage product or may place restrictions for these type of purchases. Lenders who do fund these purchases usually will need to underwrite a townhome or condo the same way, meaning they may look at the townhome development as if it were a condo complex and comparing the percentage of owner-occupied vs. rented dwellings as this affects long-term value. As a result, the terms, interest rates or fees on these mortgages may be higher as it is looked at as a riskier loan from the lending standpoint.  

Additionally, townhomes and condos usually don’t appreciate nearly as fast as traditional single-family homes because they are limited with the improvements that can be made and can’t be expanded to force appreciation. While most townhome and condo owners or home buyers in general don’t purchase for profit as the main goal in their home purchase, it is wise to understand this from a value standpoint so you can plan accordingly and should you choose to sell it down the line you are at least able to regain the initial money invested into the property. However, many townhome owners get around the appreciation problem by simply turning their townhomes into rental properties once they’re ready to move into a traditional property. It’s definitely not for everyone and make sure that the association you are buying in allows it. If not, the option for owners for selling allows them to make their next mortgage more manageable and townhomes and condos are a good way to get the ball rolling on with your homeownership journey in order to scale and leverage your buying power in the future!