Mortgage Advice

Understanding Mortgages: Buying a Condo

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(8/23/2012) Condos offer owners the opportunity to own, yet relieve some of the burden of taking care of a building’s interior and exterior. Buyers of a condo pay mortgage, interest, and tax for their unit, and also monthly dues for the condo association, which goes towards upkeep and improvement of those common areas.

Generally, condos are considered a good investment. They are often lower in price than comparably-sized single-family homes. Also, condos often maintain their property values better than other properties, protecting your investment over time. While a condo is similar to renting an apartment, it offers the benefits of tax deductions for home ownership and the building of equity that renting does not.

Condos can often be more secure than other properties, with locked security gates and doors, and even doormen. Assessments cover a good portion of the maintenance of the unit and building, including landscaping, snow removal, sewage, water, trash collection, and other tasks. Finally, condo buildings can offer great amenities not available to single-family homes, like swimming pools, workout facilities, rooftop decks, and more.

Buying a condo is similar in most ways to buying a single family home or other property. The main difference is the need for additional paperwork for the housing association. These documents may vary by state, but will typically include a covenants, conditions and restrictions document, bylaws, and meeting minutes. It’s important to read over these documents carefully before signing and even before making the decision to buy. Consider how the building is run and governed, specific rules that could affect your behavior, and the presence and total of “reserve funds,” or money set aside to cover major building repairs.

Important to remember are a few additional costs. Besides the monthly assessments, consider insurance and the possibility of special assessments. While the general property is insured by the condo association, which covers the exterior and all common areas, condo insurance is still needed to protect the contents and structure of each individual unit. Also, condo owners may occasionally need to contribute additional assessment funds for major building initiatives, particularly if reserves are low or gone. Depending on the project, special assessments could be a small additional amount or thousands payable all at once or over a specific time.

For Additional Reading:

7 Questions You Must Ask Before Buying a Condo:

5 Tips for Buying Condos in a Down Market:

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