Condo living has its own drawbacks. No one can deny that. However, no other housing option offers the same convenience as a condominium. Shared spaces like on-site fitness centers, clubhouses, spas and swimming pools along with maintenance, repairs, security and concierge services are all managed by an HOA in exchange for a fee that each condo owner must pay. Since condo HOA fees can be substantial, our first piece of advice to anyone who wants to buy a condo is to consider the following three points before committing to a mortgage.
- There is no real cap on HOA fees. While there are plenty of condos with affordable HOA dues, no one can tell how much the fees will go up, as there is generally no limit on how high an HOA can raise its annual dues. The fees are calculated based on an estimated yearly budget the HOA needs in order to cover different expenses like general maintenance, repairs, improvements, insurance, security services, etc. An HOA also collects money for a reserve fund, which is typically used to cover major unexpected costs such as repairing the clubhouse roof, resealing the pool, replacing a piece of equipment in the gym, and the like. Because the costs are always on the rise due to inflation, most HOAs increase their fees on an annual basis. However, some states limit the increase of HOA fees. There also are situations in which CC&Rs indicate exactly how much an HOA can increase its dues and assessments in a year. On the downside, improper funding of reserves can prevent an HOA from properly maintaining a condominium. This will eventually lead to problems that can negatively impact the market value of all the condo units in that housing development.
- Condo HOA dues are higher for bigger spaces – Most HOAs apportion dues according to square footage. Consequently, getting a smaller unit means paying less in fees. In addition, smaller condominiums usually have fewer things to take care of. In some situations, condo owners can also help out with different tasks like lawn maintenance, hallway cleaning, and even small repairs. All these will result in smaller HOA fees for each condo owner. As well, smaller HOAs keep minimal reserves or have no reserve funds, members typically paying special assessments out of pocket when required. Unfortunately, that isn’t applicable to larger housing developments overseen by third-party property management companies. In this case, all the costs associated with running the property complex are included in the HOA fees.
- Not all condo HOA fees are deductible – Depending on where the building is located, how old it is and the amenities it provides, condo HOA fees can add up to nearly one thousand dollars a month. This amount can make owning a condo more expensive than owning a comparable single-family home. While homeowners can deduct certain personal housing-related costs like mortgage interest and property taxes, HOA dues paid on personal residence aren’t deductible.
While a focus on down payment, interest rate and loan term is completely understandable when taking out a mortgage to buy a piece of property, it’s important to consider the full cost of ownership, including the HOA dues, in order to make a truly informed decision.
Whether you’re at the stage of buying your first or second home, we can walk you through every step of the mortgage application process. Just give us a call today at (904)-389-4635 and our specially trained mortgage professionals will answer any questions you may have about the home financing and refinancing products we offer at North Florida Mortgage.