If you’re looking to get into the housing market, you’ve got plenty of decisions to make, including what type of home to buy. In this case, you may be deciding between a condo vs a house. Both offer plenty of perks, but there are also some drawbacks to each type of dwelling.
Before jumping into the real estate market, understand the key differences between condos and houses to determine which makes a better fit for you.
Key Points
- Condos are usually more affordable than houses, come with various amenities, and are often located in urban areas.
- Houses are typically bigger than condos and come with more flexibility and freedom, though their initial price tag is typically much higher than condos.
- Deciding between a condo and a house ultimately comes down to your budget and lifestyle preferences.
Condo Vs House: What’s The Difference?
Condos and houses are two different types of residential dwellings:
What Is A House?
A house is a single-unit residential building that’s typically designed to accommodate a single family. There are no outside entities that govern the ownership and operation of a home. Instead, the owner(s) have sole property rights and full control over changes, renovations, and landscaping, as long as they adhere to local regulations.
What Is A Condo?
A condo is a type of residential property whereby individual units are owned by separate individuals, but common areas and amenities are shared by all unit owners.
Separate condo unit owners only have so much control over their homes, as the condo board governs the entire complex. Condo owners are also required to pay a monthly condo fee, which covers a variety of expenses, including the maintenance of the grounds and all shared amenities.
Condo vs House: Major Differences
There are significant differences between condos and houses, particularly in terms of the following:
Cost
The cost of a condo is generally lower compared to houses. This is a big appeal for home buyers looking to keep costs low, particularly in the midst of an affordability crisis.
Home insurance for condos is also typically lower compared to houses since it only covers the interior of the unit. For houses, insurance covers the entire property, including the structure and land, which is why it tends to be more expensive.
With houses, however, there are no condo fees to pay every month. That said, these fees cover maintenance expenses and other costs of property upkeep that homeowners would otherwise pay out-of-pocket. Depending on the situation, condo fees could cost more or less than what homeowners pay to maintain their homes.
Condo Fees
As mentioned, condos require homeowners to pay monthly condo fees, which are used to cover the cost of exterior and common area maintenance. These fees can add a significant additional monthly cost to condo owners.
There is also a ‘reserve fund’ that condo owners should be aware of. This fund is somewhat of a long-term savings account that is set aside by the condo community to cover the cost of major repairs and replacements. If this fund is managed properly, there is little for condo owners to worry about.
But if this fund is not large enough, or if major unexpected repairs come up, condo owners could be on the hook for a ‘special assessment’. This is an extra one-time charge that condo corporations use to cover shortfalls in the reserve fund.
Governing Body
Condo associations not only charge a fee every month, but they also govern the complex. These associations can restrict various aspects of condo living, including making modifications to the unit, pet ownership, parking, and others.
Houses, on the other hand, do not come with condo associations and rules that apply strictly to specific condo complexes. Instead, homeowners have much more flexibility in terms of how they use their homes, as long as they follow local laws.
Space
Condos are usually much smaller than houses. This includes the interior living spaces, storage space, and outdoor space. Further, condos are usually just one level, while houses often come with multiple levels and/or basements, offering more living space. Houses also often come with private yards, garages, and more storage.
Maintenance
Condo living requires minimal maintenance. The monthly condo fees cover maintenance, so owners have very little upkeep to worry about. Only interior unit maintenance and repairs are the owner’s responsibility.
With a house, on the other hand, owners are fully responsible for all maintenance, both interior and exterior. This includes things like landscaping, snow shovelling, and other chores. This requires more time, effort, and money.
How Condo Fees May Affect Your Mortgage Amount
Not only should you be mindful of how much condo fees will cost you every month, but it’s also important to consider how these fees can impact your mortgage approval.
Lenders consider condo fees during the mortgage approval process, as these fees directly affect your monthly housing expenses. The higher the condo fees, the lower the loan amount you may be able to qualify for.
To determine your ability to get approved for a mortgage and the loan amount you qualify for, lenders use two key calculations:
- Gross Debt Service (GDS) Ratio: This ratio represents your total housing costs relative to your income and should not exceed 39%.
- Total Debt Service (TDS) Ratio: This ratio includes your total homeownership costs as well as all other debts relative to your income and should not exceed 44%.
To calculate your housing costs when buying a house, lenders will factor in your mortgage payments, property taxes, and heating costs. But if you’re buying a condo, 50% of condo fees will also be included in these calculations, which will increase your debt service ratios.
Pros And Cons Of Condos
Condos come with several perks and drawbacks. Make sure you weigh these before deciding what type of home to purchase.
Pros
The following benefits come with buying and owning a condo:
- More affordable. Perhaps the biggest advantage of a condo is that they’re typically cheaper to buy than houses in the same area. For example, in Toronto, the average condo price is currently $729,005, compared to $1,097,300 for houses.
- Security. Condo complexes often have security features, such as gated entrances, surveillance cameras, and 24-hour security guards.
- Amenities. When you purchase a condo, you’re also gaining access to various amenities. These can include things like swimming pools, fitness rooms, basketball courts, ping-pong tables, spas, pet baths, and other recreational activities.
- Easier to maintain. Condo complexes come with maintenance crews that will take care of tending to all features of the property and handle any repairs that arise. As such, owning a condo requires less maintenance, which can be an attractive feature for those who prefer fewer responsibilities.
Cons
Consider the following downsides to condos before making a purchase:
- Monthly fees. As mentioned, condos usually come with monthly fees that cover maintenance and repairs of common areas. These fees can cost an extra few hundred dollars per month. Depending on the location and complex, these fees can even top $1,000.
- Less privacy. Sharing walls and being so close to your neighbours means less privacy compared to living in a house.
- More noise. When you own a condo, there’s always the potential for noisy neighbours, which can be bothersome considering the close proximity of units. Maintenance crews conducting work can also be an issue.
- Rules and restrictions. Condo boards typically have rules that unit owners must abide by, which can restrict certain activities, renovations, or lifestyle choices.
Pros And Cons Of Houses
Owning a house comes with its own set of advantages and disadvantages to consider before getting into the housing market.
Pros
You can take advantage of the following benefits if you choose to buy a house:
- More freedom. When living in a house, you have the opportunity to enjoy a lot more freedom and flexibility to do with your home what you want. You’re in control and don’t need permission from a condo board if you want to make any modifications, get a pet, or even what colour to paint your front door. Owning a condo does not give you this same level of freedom.
- More privacy. Houses typically offer more privacy than multi-unit residences like condos. This is especially true if you live in a detached home. Even if you are living in an attached home, you still may have more privacy, particularly with your outdoor space.
- More space. Houses usually offer more living space compared to other types of dwellings. Houses are typically larger than condos and offer multiple bedrooms, bathrooms, and bigger living areas. They often also include private yards, gardens, and sometimes additional structures like garages and sheds.
- Extra room for rental potential. If you think you’ll need help paying the mortgage, you may consider renting out a room in your home or the basement. Just make sure you understand that you’ll need to report your rental income when you file your income taxes.
Cons
While owning a house has its upsides, there are also some notable drawbacks to consider:
- Higher initial cost. The purchase price of a standalone home is typically higher than a condo in the same area, generally speaking.
- Higher utility costs. Since houses are typically larger than condos, you’re spending more on heating and cooling for a house compared to a condo.
- More maintenance. As the homeowner, you assume full responsibility for all maintenance and repairs, whether you tackle them yourself or pay a professional to handle them.
- Not as widely available in urban areas. If you like the idea of being able to walk to everything, then living in a city centre might be ideal for you. Unfortunately, single-family homes aren’t as widely available in these areas compared to condos. And if they are, they’re likely to be much more expensive than what you’d find in the suburbs.
Condo Vs House: Which One Should You Choose?
As you can see, there are plenty of perks to both condos and houses. So, which one is a better choice for you? The answer depends on your lifestyle and needs.
Condos are best for…
Seniors
Condos offer a smaller, more manageable living space, which is ideal for those looking to downsize from larger homes. They’re easier to manage and are more affordable upfront, which is great for seniors who don’t want to spend much time with home maintenance or are on a tight budget.
Condo units are also usually one level, so seniors don’t have to worry about stairs and accessibility. There may even be social activities and shared spaces offered by the condo corporation that provide a sense of community and opportunities for socializing.
First-Time Home Buyers
Since first-time buyers don’t have the proceeds of a previous sale to work with, they’re typically on a tighter budget than those who already own a home. Condos often have a lower purchase price compared to single-family homes, making them more affordable and accessible to those entering the housing market for the first time.
Real Estate Investors
Condos can be a good investment for earning rental income, especially in high-demand city centres. Since their price points are typically lower than single-family houses, condos are easier for novice real estate investors to purchase. Further, condos in desirable locations have a good chance of appreciating in value, providing a good return on investment over time.
Houses are best for…
Large Families
Houses typically offer more living space, including multiple bedrooms and bathrooms, which is ideal for families with children or extended family members. These types of dwellings also offer larger outdoor spaces and private yards that provide a safe play area for kids and outdoor activities.
Real Estate Investors
Historically, houses tend to appreciate more steadily over time compared to condos and have a greater potential for a substantial increase in equity. Single-family houses can also provide steady rental income for investors, particularly those that are located in desirable neighbourhoods. Plus, houses can be converted into multi-dwelling units and include basement apartments or accessory apartments.
Final Thoughts
Choosing between a condo and a house depends on your financial situation, lifestyle, and personal preferences. Make sure to consider these factors to make an informed decision that best suits your needs.
