Just What is a Condominium?
You may have a basic understanding of what a condo is: you own your “unit” within a larger building or community of other condo owners. You jointly own the exterior property and common areas with all unit owners in the building or community. Condo owners pay a monthly “condo fee” that covers general repairs and maintenance to the building exteriors and common areas and builds up a cash reserve for future needs.
There are many styles of condos, from high-rise apartments reached through common interior hallways or garden-style apartments with outside entrances to multi-story townhomes. Each condo is different, but generally the maintenance of exterior and common areas is taken care of through your condo fee, so you don’t have to worry about replacing a roof, for example.
But there’s more to know. And one important thing is that condo ownership is homeownership. As a condo owner, you’ll enjoy both the benefits and the responsibilities of homeownership.
You may find that homeownership provides you with tax and investment advantages. For example, you may be able to deduct your mortgage interest if you itemize deductions on your tax return, and you may discover that, like detached homes, condos may appreciate in value over time. Please consult your tax advisor about your individual situation.
Some important things to keep in mind
- Condos represent a community form of ownership.
- In addition to your monthly mortgage payment, local property taxes (in most areas), and insurance costs, you will pay a condo fee that may also be referred to as “homeowners’ association” (HOA) dues or fees.
- Your lender will factor in the condo fee in determining how much of a loan you can qualify for. And, like detached homes, if your down payment is less than 20 percent of the purchase price, you may also have to pay PMI, or private mortgage insurance, each month—which is generally cancellable once you have more than 20% equity in your home.
- Your monthly income, credit history, and monthly debts — the “home-buying basics” — all help determine if you qualify for a mortgage.