Choosing the right home
House, Townhouse or Condo?
Would you rather own a house, townhouse or condo? In pricey real estate markets like Toronto and Vancouver, you might not have a choice: all you may be able to afford is a condo. But for those buying in more affordable markets like Edmonton and Saskatoon, with a decent down payment, you’ll have more choices.
For me, a house was the right choice. Although my lifestyle is better suited for a condo, I chose a house because I believe it’s a better long-term investment than the other options.
Here are factors to consider when choosing.
A house offers a lot of freedom. Houses don’t come with as many restrictions as do condos and townhouses—you’re free to decorate the exterior, choose the window coverings and landscape pretty much as you see fit. A house frequently comes with a yard (perfect if you have children, or just to enjoy yourself ). House prices tend to go up faster than condos and townhouses. And you can rent out part of your house, to help pay down the mortgage.
A house also comes with a lot more responsibilities. You’ll have to mow the lawn (provided your lawn has grass) and shovel the snow (or pay someone to do it). Expect to spend more on home maintenance and repairs than if you owned a condo or townhouse (condo or association fees usually cover those). If you live a busy life or you’re not particularly handy, you may be better off in a townhouse or condo.
A townhouse is a good compromise between a house and condo. The purchase price typically falls somewhere in between the two. Many townhouses are governed by a homeowners’ association, which looks after maintenance and repairs, snow shovelling and yard work. Association fees may also cover amenities like a gym, swimming pool and tennis court. Security tends to be less of a concern than with a house, since your neighbours are close by.
Townhouses may not offer as much privacy as a house, since you’re close to your neighbours. You also don’t have as much freedom, as there are often restrictions on changes you can make to the interior and exterior. The yards of townhouses tend to be small—keep this in mind if you have a dog or like to entertain outdoors.
If a house is out of your price range, a condo may be the perfect fit. Condos are typically a lot more affordable than houses. You’ll have a smaller mortgage and can pay it off sooner. With a condo, you won’t have to worry about major repairs like a new roof or windows, since your condo fees cover those. Your condo fees also cover most utilities, and repairs and maintenance. This makes budgeting a lot easier. Other reasons to choose a condo include lifestyle preference, amenities and security.
When you own a condo and don’t have a basement apartment, it’s more difficult to “subsidize” your mortgage. You can get roommates, but you have to be comfortable sharing your personal space. Condos don’t come with the same freedom as houses; there are often restrictions on everything from window coverings to pets. Your condo fees could skyrocket if the condo board is managing things poorly (not to mention that if you don’t pay your condo fees, a lien can be put against your property). And if you receive special assessments—one-time fees for costly repairs not covered by the regular condo fees or contingency fund—you have no choice but to pay them.
If you don’t mind living in cramped living quarters, a micro condo is an affordable option for single homebuyers in big cities. They’re not for everyone—on average they’re only 300 square feet (about the size of two parking spaces). They include space-saving features like a Murphy bed, movable wall panels and fold-out cabinetry. Think long and hard before buying a micro condo—you might have a tough time reselling it in a slower market. Some lenders are also hesitant to approve mortgages on them for this reason.
Written by Sean Cooper
About the Author
Sean Cooper is the author of the upcoming book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Financial Journalist and Personal Finance and Mortgage-Burning Expert, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post, Tangerine: Forward Thinking blog and MoneySense. You can follow him on Twitter @SeanCooperWrite.