Townhome vs. single-family home [how to decide]

If you are thinking of buying a home, one of your decisions will be whether to purchase a townhome/condo or a single-family home. Either is a good option, depending on your needs and preferences. Consider the following factors when making your decision.

Monthly fees

• Townhome/Condo — You pay monthly homeowner’s association (HOA) fees. The level of those fees depends on the services the HOA provides and will usually increase over time.
• Single-family home — There are no HOA fees.

Convenience

• Townhome/Condo —Your HOA fees might cover lawn care, snow removal, insurance on the external structure of your home, garbage and recycling collection, external maintenance and repairs of the building, water bills, and even amenities like a swimming pool or fitness center. This might be attractive if you don’t want to devote a lot of time on upkeep of the property. Make sure you know what services and amenities are covered before you buy.
• Single-family home — You are responsible for all external maintenance, municipal services and amenities.

Privacy

• Townhome/Condo — You typically share at least one common wall, so you might be able to hear what’s going on with your neighbors next door and vice versa. Ask your realtor or seller about noise levels from the neighboring homes.
• Single-family home — You do not have this issue.

Rules

• Townhome/Condo — Owners must comply with the HOA rules and regulations. These might include HOA permission for any changes you want to make to the exterior structure of your home, restrictions on what you can do outside (e.g., hang plants, grill food, create a garden) and parking restrictions if you don’t have your own garage. Be sure you read the HOA rules before purchasing so you know what to expect.
• Single-family home — Restrictions don’t apply, with the exception of city guidelines, such as odd/even side of the street parking, maintaining sidewalks, etc.

Uniqueness

• Townhome/Condo — Due to HOA restrictions, your ability to put your own personal touch on the home’s exterior will likely be limited and your home will look similar to others in your association.
• Single-family homes provide opportunities to experiment with the external look of your house and property.

Pets

• Townhome/Condo — The HOA rules often have restrictions on the kinds and number of pets you can house.
• Single-family home — Pet restrictions are fewer and depend on the ordinances in the city where you buy your house.

Homeowners insurance

• Townhome/Condo — Your homeowners insurance costs should be lower because the external structure is insured by your HOA. You typically just need to insure your possessions inside your home.
• Single-family home — You pay more because they cover the cost of insuring both the structure of the home and its contents.

Size

• A single-family home might have larger square footage and a larger yard than a townhome/condo. There is also potential for home additions. Keep in mind that adding on to your home/building a structure on your property (i.e. a deck) might require city permits and fees.
• Townhome/Condo — If allowed, home additions require the HOA board’s approval.

Affordability

• Townhome/Condo — The purchase price is usually less than a similarly-sized single-family home, which can mean a lower mortgage payment. Your monthly housing costs can also be more affordable overall if the HOA fees are not high.
• Single-family home – Affordability depends on the location, lot and house size, and amenities.

Asset creation

• Townhome/Condo — Once you pay off your mortgage, you own only your unit, not the land it sits on.
• Single-family home — Once you pay off the mortgage, you own 100% of the home and the land.

LSS Financial Counseling has a Homebuying Service to support individuals and families who are considering buying a home. Our experienced, knowledgeable housing counselors can explore options with you, work with you to get your finances in order, and connect you with resources to make your purchase more affordable. Call 888.577.2227 for a free, confidential appointment.

Author Mei Lin Kroll is a Certified Financial Counselor with LSS Financial Counseling.