Condo units are gaining popularity in the United States. According to a press release from the Community Associations Institute (CAI), more Americans are choosing to reside in condominium communities and homeowners associations (HOAs). Over a quarter of the country’s population live in a condo.
Condominiums offer a range of benefits to homeowners. They can come with numerous amenities, including swimming pools, fitness centers and play areas for the kiddies. What’s more, they involve less upkeep compared to a traditional house and lot.
Despite the many perks of condo ownership, you need to look at the financial costs added to the property price. Knowing what fees and expenses to expect will help you determine if you can afford to make this major investment.
Here’s a breakdown of the expenses associated with owning a condominium unit:
Mortgage Payment
This is the most obvious expense you’ll need to consider. When you purchase your first home, you need to get a home loan to finance the purchase. Unless you’re paying the condo unit in full, you’ll have to meet the lender’s minimum monthly loan payments.
Insurance
Insurance costs for condo ownership come in two forms: private mortgage insurance (PMI) and condo insurance. If you’re going to purchase a condo unit with a down payment of less than 20 percent, your lender will require you to shell out cash for PMI.
Securing PMI may prove difficult for some condo unit purchases. This happens when the value of the unit varies greatly due to factors, such as comparable sales within the building and the overall value of the whole condominium. Given that these factors aren’t predictable, many insurers aren’t keen on insuring condo mortgages.
Apart from PMI, you need to factor in condominium insurance into the overall costs. This type of policy covers your personal property along with your unit’s interior. Unlike house and lot owners wherein you need to insure the whole property structure, you only need to insure the interior. The master insurance policy of your condo association should be able to cover the common areas and unit exterior.
Association Fees
As a proud owner of a condo unit, you avoid the hassles of certain maintenance tasks, such as maintaining the landscape, replacing damaged windows, and repairing or installing a new roof. This maintenance-free benefit, however, has a price tag attached to it. You’ll have to pay maintenance dues – sometimes called homeowner’s association dues or property owner’s association dues. Condo unit owners receive a bill every month, quarter, or year that details the building’s maintenance fees.
If you come across an old condo unit for sale, be prepared to pay higher maintenance costs. Aging amenities may necessitate frequent repairs and maintenance, which translate to higher dues.
On the other hand, a condo complex may have a lower association fee if it has fewer amenities. If you want to live in a condo but don’t care for the pool or gym, shop around until you find what you want. Once you find your ideal condo complex, you could enjoy cost savings on your HOA.
Before you say “yes” to a condo deal, get in touch with a real estate agent and ask about the frequency and amount of the dues. Remember that these aren’t optional expenses, even if you don’t have plans on using some of the condo’s amenities. Failure to pay the required association fees can result in a lien on your property.
Property Taxes
If you own a property, you’ll need to pay taxes. The amount can vary on many factors, such as location. Some states impose higher taxes than others. If you buy a property in New Jersey, for instance, you could look at a $7,800 tax per year. You’ll generally be paying property tax on a monthly installment if you have a mortgage.
Parking Spots
Sometimes, the cost of the parking space isn’t part of the total condo unit price. If you drive a car, you’ll need to pay for your private parking spot. The amount will vary depending on the price set by the building.
Special Assessment Fees
Condo owners are subject to special assessments. These additional dues typically cover unexpected expenses. An example is a surprise service or upgrade on a heating or air conditioning unit that requires immediate action.
The cost of a special assessment could amount to anything. It could run from several hundred dollars to over a thousand dollars.
These are six expenses you should take note of when getting a condo. If you’re looking to make the most of your condo unit, consider renting it to others. You could use the rental income you generate to offset some of the condo ownership costs.