A lot goes into the decision to buy a home. You need to decide on the location, price range, and size that will meet your needs. You also need to consider what type of home is the best option for you – a single-family home, townhouse, or condo.
Deciding on the right type of home means thinking about your needs in the present as well as what you might need in the future. Before you jump into the process of buying a home, get to know the differences between these three types of housing.
Condo, Townhouse and Single-Family Home
How each of these are defined is the first thing to know about how these types differ:
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Condo: Part of a group of houses or apartments that might be in the same building, attached by an exterior wall, or otherwise part of a shared community. Residents own the units they live in, instead of renting from a landlord. Residents share ownership of common areas, such as a lobby. Residents don’t own the structure of the building. |
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Townhouse: Usually a single or multi-story house that is attached to other houses on one or both sides. Townhouse owners own the interior of the townhouse as well as the land outside. |
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Single-family home: A detached, stand-alone home that has its own lot. The owner of a single-family home owns the structure as well as the lot it sits on. |
The table below further outlines the differences between the three:
| CONDO | TOWNHOUSE | SINGLE-FAMILY HOME | |
|---|---|---|---|
| Attached? | Yes (usually) | Yes | No |
| What Do You Own? | The interior | The interior and land | The interior, exterior, and land |
| Size and Style | Can be an apartment in a high-rise building, a multi-story unit attached to other units, or a freestanding home in a cluster of homes. | Usually, a multi-story unit attached to other townhouses on either side. Some townhouses may contain multiple apartments within them. Others are one unit. | Usually a detached home. Can come in a range of sizes, from a single story to several stories. |
| Community Features | Usually includes community amenities such as a gym, lounge area, pools, shared garden, or courtyard. | Might have some community features, such as a pool or lounge areas, depending on the property. | Usually completely detached from the community around it. But since the owner also owns the land the home sits on, there’s the option to add features such as a pool or fitness area. |
| Fees | Homeowners’ Association (HOA) fees. Fees vary based on what’s included. Also, the HOA may determine certain repairs are needed that aren’t covered by HOA fees, meaning each owner needs to pay more out of pocket. | Some townhouse communities do charge maintenance fees or HOA fees depending on the amenities available. | Usually none, but some single-family homes are part of a larger community that may require HOA fees. Typically, you do have to pay out of pocket for all repairs. |
| Cost to Insure | Lowest cost to insure since you only need to protect the interior of your unit. | Slightly more expensive to insure, because you are protecting the interior, exterior, and the land directly below the home. | Most expensive to insure, as you need to protect the home and any land you own. |
| Maintenance | HOA fees go toward maintenance projects such as exterior upkeep, landscaping and garbage collection. You aren’t individually responsible for exterior tasks, but you are for interior ones. | You are usually responsible for the costs of maintenance unless you are a part of the HOA. | You are entirely responsible for maintaining the interior and exterior of the home. |
| Privacy Concerns | Privacy can be an issue, especially if there are attached homes on all sides of your condo. | Privacy can be an issue, as there is usually at least one home attached to yours. | The most private of the three options, since you don’t share walls with other properties. You can also put up a fence or line of trees in the yard for additional outdoor privacy, unless this is not allowed by your HOA or township. |
Outside of these differences, price is another distinction among the housing types.
How to Decide Which Type of Home to Buy
If, after looking at the differences between a condo, townhouse and single-family home, you’re still not sure which is the right one for you, it helps to zero in on your particular needs. Important considerations include your budget, where you want to live, how much house you need, and your future plans.
1. Initial Price
Your budget plays a role in determining which type of home is right for you. Single-family homes often have a higher price tag since you’re buying the entire structure as well as the land assigned to it. A condo might have a lower price, but it may end up costing you the same amount as a single-family home each month, depending on the amount of the Homeowners’ Association (HOA) fees.
If you’re not sure how much house you can afford to buy, take a close look at your income, debt and other regular expenses to determine how much of a monthly payment you can afford. Keep in mind that when applying for a mortgage, your debt-to-income ratio could be considered. Lenders may use this to determine if you can afford the mortgage you’re applying for.
When determining your debt-to-income ratio and how much home you can afford, it’s important to keep in mind that any recommended ratios are just that — recommendations. You may have other costs or monthly expenses that aren’t debt, but still make it challenging for you to comfortably repay a mortgage. Learn more about the different types of home loans here.
2. Size
How many people will live in the house? Do you plan to work from home? Do you want a big yard? Usually, single-family homes are larger than condos or townhouses, so if you need a lot of space, you may prefer a single-family property.
However, if you’re looking for a compact space because there are just one or two people in your family or you don’t want to deal with the hassle of maintaining a large home, then a condo or townhouse may be a better option.
3. Amenities
Do you dream of having a pool? Some condo communities have pools, and as an added perk, you aren’t responsible for pool cleaning or maintenance. Some townhouse communities may also have a pool, as will some single-family houses.
Of course, if you buy a single-family home that doesn’t have a pool, you may have the option of adding one later. You also have the option of fully customizing your yard to meet your needs – with the responsibility of cleaning, maintaining, and insuring anything you add to your property.
When deciding which type of home works best for you, make of list of your must-have amenities, such as a gym, a pool, or outdoor space. Then, compare listings to see which home is more likely to provide those while still being within your budget.
4. Location
Where you plan on living influences the type of housing options available to you. Single-family homes do exist in urban areas, but they tend to be few and far between and may be more expensive. You’re more likely to find condos and other attached homes in a city center.
5. Responsibilities
Some people love the idea of spending time in the yard or doing home maintenance tasks. Others want to run in the opposite direction when they hear words like “lawn mower” or “paint roller.”
If you don’t mind doing work around the house or are looking forward to caring for a property and making it your own, a single-family home may be the best option. You’ll be responsible for all the little details, from choosing the paint color to deciding what to plant in the yard. You’ll also have to deal with any problems that crop up, such as a tree that falls or a broken heating system on a cold winter day.
If you want home ownership without those pesky maintenance tasks and without having to worry about whether the grass is getting too long or the exterior paint too dingy, you may want to go the condo route.
If you’re looking for some middle ground, a townhouse may be your best bet. You often don’t have to worry about extensive yard work, because it’s usually taken care of by your HOA.
6. Ongoing Costs
Whether you buy a condo, townhouse or single-family home, it’s important to understand that there’s more to homeownership than making a monthly mortgage payment. All home types come with ongoing costs. What those costs may entail varies based on the kind of home you purchase.
- Utilities: How much you pay for services each month depends in part on your usage, the cost of energy in your area, and the size of your home. It will cost more to heat a 2,000-square-foot single-family home in the middle of winter than it will to heat an 800-square-foot townhouse or condo.
- HOA fees: While HOA fees may cover landscaping, outside damages, and general community maintenance, they can be expensive when you add up those monthly fees over time. Make sure you understand the details of what they cover and if they’ll increase over time. When a realtor shows you a home, they should tell you if it’s part of an association and what the current monthly fee is.
- Cost of repairs: No matter what type of home you buy, there’s no way to dodge the cost of repairs. It’s important to set aside emergency money for home repairs or necessary purchases. When you’re buying a condo or townhouse, you’ll also want to understand how repairs you or a neighbor make could impact you financially since your homes are connected.
- Insurance: You need to pay for homeowners’ insurance no matter what type of home you buy. Usually, the smaller the property and the lower its value, the lower your insurance premium is.
- Property taxes: You also have to pay property tax no matter what type of house you buy. The amount of the tax varies based on location and size of the home.
7. Resale Value
Although you may plan on staying in your new home for the foreseeable future, it’s important to think about the potential resale value of the home when you buy it. While it’s difficult to predict the future, single-family homes generally tend to have a better resale value than condos or townhouses.
One reason why single-family homes tend to have a better resale value than condos or townhouses is that there are usually fewer factors affecting the quality of the home. When you buy a single-family home, you’re in charge of its care and upkeep. When you buy a condo, the HOA has more of a say in how the shared areas of the property are managed, so you can’t completely control how it looks or is maintained. While you may have a great HOA that keeps things up-to-date and clean, you may also end up in a situation where the HOA is lax or doesn’t do what it’s supposed to, which can affect resale value.
Quiz: Should You Buy a Condo, Townhouse or Single-Family Home?
If you’re still not sure which home is right for you, take a look at the following statements and choose the answer that best describes you. Keep track of your answers and then look below the quiz to see what your choices say about the kind of home you want.
- When it comes to privacy, you:
- Want a close community, but do need personal space.
- Want complete privacy and don’t want to share walls.
- Like the idea of bumping into neighbors in the hallway or chatting in the elevator.
- The three things you think are most important in a home are:
- A place to sleep, entertain friends, and express yourself.
- A place you can put your own stamp on, plenty of space indoors and out, and a quiet refuge for you and your family.
- Location, convenience, and affordability.
- You’d rather live in:
- The suburbs or city.
- A rural area or quiet suburb.
- A city, so you can walk or bike to work.
- It’s better to pay someone to take care of repairs:
- Sometimes.
- Never!
- Always.
- The features you can’t live without include:
- Nice community and no yardwork.
- A big yard and at least three bedrooms.
- A pool, fitness area, and no outdoor maintenance.
- When you think about yard work, what’s your general reaction?
- Don’t mind a few simple tasks, like taking care of a small garden or potted plants.
- Can’t wait to throw a huge backyard party and have all the plants picked out for your garden.
- Don’t have time for it.
- The following describes your financial situation:
- You have a small down payment saved and would like to maximize the amount of house you can afford.
- You’ve saved up 20 percent, have enough savings to cover emergency repairs, and want to get the best interest rate possible.
- You feel most comfortable with a low mortgage payment, even if it means getting less space and privacy.
- For you, the perfect weekend involves:
- Exploring your town or city and spending time with friends, either at your home or someone else’s.
- Playing with the kids or pets in the yard and trying out new paint colors in the bathroom.
- Getting out of town or hanging out by a pool.
- You want to buy a home because:
- You want to be free to decorate inside and start building equity in a home.
- Your family needs a space of their own, and you’re financially ready for a large purchase.
- You like apartment living, but you’re tired of having the landlord increase your rent each year.
- After you buy a home, you’re most looking forward to:
- Quickly moving in and then getting back to your typical schedule.
- Customizing and making your home truly yours, possibly by making some improvements to it.
- A simple life. No yard work. Just being able to enjoy the local area.
If you answered mostly 1’s, a townhouse may be the best fit for you. If you chose mostly 2’s, a single-family home may suit you best. If you chose mostly 3’s, a condo may be the ideal living situation for you.
Keep in mind that many features can be found in all three different types of homes. For example, you can find townhouses with attached garages. You can also find single-family homes that are in a HOA community that does the landscaping for you. And many townhouses and condos have excellent soundproofing, which may make it hard to tell that you have neighbors.
The best thing to do is create a list of “must-haves” for your home and a secondary list of “nice-to-haves” and give them to your realtor to help you find the best solution that fits within your budget.
Now that you have a better idea of what kind of home is right for you, learn more about our low-rate mortgages. You’ll also find more money management tips and resources on our WalletWorks page.
