A townhouse is a multi-story home that’s owned by individuals and is attached to at least one other similar unit. This type of hybrid dwelling combines features of a single-family home with a condominium—having some of the benefits and challenges of each. It’s also sometimes called a townhome or a row home or house.
Differences between a detached home and a townhouse may be clearer than differences between a townhouse and a condo. After all, a home is a freestanding structure while a townhouse, like a condo, is part of a complex.
So, how is a townhouse different from a condo? Well, for one thing, although townhouses would share walls with units that are right next to theirs, there wouldn’t be a dwelling above them or below, as could be the case with a condo.
Typically, people who own a condo are responsible for the interior of their units, while funds that they pay into their homeowners’ association (HOA) are used to maintain shared areas and the outside of the building.
Townhouse owners, though, are usually responsible for maintaining the inside and outside alike, which is more like owning a home.
Because townhouse owners are usually responsible for more maintenance than condo owners, their HOA fees are often smaller, and they typically have more freedom on how to renovate their dwellings. Neither of these is universally true, though, so it’s important to check the specifics of the property of interest.
People who are looking to buy a residence may be asking themselves, “Is buying a townhouse a good investment? What are the pros and cons?”
This post will share pros and cons of buying a townhouse, along with insights into getting a mortgage loan.
Pros of Buying a Townhouse
For some people, the fact that they would have control over the inside and outside of their townhouse might make it more appealing than the purchase of a condominium. They might appreciate how they have more ability to make decisions about their property.
Additional benefits of buying a townhouse can include the following:
• A townhouse can be an affordable option in communities with higher home prices, providing a space-savvy housing choice in places where available land can be scarce; although townhouses may be more expensive than a condominium in a community of choice, they tend to be less expensive than a detached home.
• Townhouses may be appealing to busy people; there’s no big yard that needs time and attention and, if owners travel a lot for work and/or pleasure, security services that may be covered by HOA fees can help to protect the dwelling without any extra steps needed—and the complex may even be gated for added security.
• There may be great shared spaces for families to enjoy; these can include gyms and pools, for example, and people who own units each have an ownership interest in these common-area benefits—which means they have a legal right to use them.
• Buyers of a townhouse will actually own the land where the property exists; in contrast, the condo owner would only own their unit, not any of the land—and this means that someone owning a townhouse is typically less restricted on how the land could be used, perhaps being allowed to grill dinner outdoors, as just one example.
• Owners of a townhouse usually pay less in property taxes when compared to a stand-alone home; this is typically true because of the smaller lot size.
This type of home could be ideal for first-time homebuyers who are looking for a more affordable option in densely populated areas. It can also be a good choice for people who aren’t interested in doing a lot of home maintenance.
But, is it perfect for everyone? No. Here are some potential disadvantages to consider.
Cons of Buying a Townhouse
First, when considering buying a townhouse vs a house, note that the detached home doesn’t typically have any sort of HOA fees associated with it. On the other hand, the detached home wouldn’t normally have amenities that may be provided by HOA fees and located in shared areas.
And, because a townhouse may have multiple ways to enter and exit, it may have some of the same security issues that come with a detached house. Here are additional potential disadvantages:
• The limited lot sizes that make it easy to minimize maintenance also means that townhouse owners don’t have the benefits that come with a larger yard, whether that means hosting larger picnics there or creatively landscaping the space.
• There may also be less ability to creatively decorate overall, not just with the landscaping. The units often look quite similar and there could be some HOA rules that limit an owner’s ability to uniquely decorate. If this is important to a homebuyer, a detached home may make more sense.
• Plus, townhouses are simply less private. Granted, there aren’t the units above and below, as there would be with a condominium, but walls are shared and lots are fairly little. This may be problematic if young children living in the townhouse want to run around and play.
• Townhouses are built upward to maximize limited land. This means that a townhouse could be three stories, even four, with only a couple of rooms on each floor. This means stairs. Perhaps lots of stairs. And, if someone in the home has physical challenges or has just had surgery, as just two examples, this can make navigation of the townhouse challenging.
• In general, the value of a townhouse does not appreciate as quickly as other options. So, when an owner sells, there may not be as much cash net from the sale as one might hope. So, it may not make sense to buy a townhouse if the idea is to invest in real estate, rather than simply having a desired place to live.
So, after reviewing the pros and cons, is buying a townhouse a good idea? Here’s one more consideration: financing the unit.
Financing a Townhouse
Seeking a mortgage loan for a townhouse can be similar to one for a home. That’s because, unlike a condo purchase, the buyer of a townhouse also owns the land beneath the dwelling.
With a condominium purchase, a lender often wants to vet the financial health of the entire condominium complex, not just those of the individual buyer. With a townhouse, the focus is typically on the buyers.
When buying a townhouse, lenders will typically want to see a buyer’s monthly income, outstanding debt, and monthly payments to figure out their debt to income ratio and see how much of a mortgage they can afford.
If the townhouse has HOA fees, those would be included in calculations. So, just as with a single family home, it can make sense to get preapproved for a dollar amount before townhouse shopping; save money for a down payment and closing costs; and so forth.
Home Loans at SoFi
SoFi makes the townhouse buying process as convenient as possible, with no hidden fees or prepayment penalties.
Buyers can get their dream unit with competitive rates and a variety of mortgage programs to choose from. In fact, there are mortgage programs available with as little as 10% down.
Mortgage loan officers are available when guidance is needed, with specialists standing by to answer questions. Borrowers can find their rate in just two minutes in a way that won’t affect their credit scores.†
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