In the market with low interest rates as it is right now, a condo fee is often as large or larger than the mortgage payment itself. You have to remember that a condo fee is used together with your mortgage payment, taxes and insurance to calculate your debt-to-income ratio. Make sure to read about those ratios in my previous post on financing.
A comparison example:
A 2-bd condo is listed for $40,000, tax $1400, homeowners' association fee $300.
Your loan amount would be: 40,000 less 3.5% ($1400) downpayment - $38,600. At the going rate of 4%, using the calculator in the right sidebar, your monthly mortgage payment comes to $184.
You add your monthly tax, condo fee, and insurance to that, and your total monthly payment is:
117 + 300 + 50 + 184 = $651.
You can pay a bit more for a house, because you won't have a condo fee. Your taxes and insurance will be a bit higher, as well. A monthly payment on a 2-bd house listed for $70,000, tax $1700 with $2450 (3.5%) comes to: 322 + 142 + 60 = $524.
At first glance it looks like a better deal, but now add the water, sewer, gas and the garbage to that payment, which all come to about $200/mo, and now your actual money-out-of-pocket monthly payment is $724 per month! Then add the health club fee, since you can't go to a free pool and a free exercise room, add the fee for mowing the grass, and the security monitoring fee - now you are looking at $800 a month. Sure, you can save on the landscaping by doing it yourself and count that effort as equal to going to a health club. Oh, almost forgot - the condo fees often include things like cable or/and wireless internet, too. So add another $50 to your house payment. Honestly, the upkeep of a house is much higher than that of a condo, and you have more headaches and responsibilities.
A comparison example:
A 2-bd condo is listed for $40,000, tax $1400, homeowners' association fee $300.
Your loan amount would be: 40,000 less 3.5% ($1400) downpayment - $38,600. At the going rate of 4%, using the calculator in the right sidebar, your monthly mortgage payment comes to $184.
You add your monthly tax, condo fee, and insurance to that, and your total monthly payment is:
117 + 300 + 50 + 184 = $651.
You can pay a bit more for a house, because you won't have a condo fee. Your taxes and insurance will be a bit higher, as well. A monthly payment on a 2-bd house listed for $70,000, tax $1700 with $2450 (3.5%) comes to: 322 + 142 + 60 = $524.
At first glance it looks like a better deal, but now add the water, sewer, gas and the garbage to that payment, which all come to about $200/mo, and now your actual money-out-of-pocket monthly payment is $724 per month! Then add the health club fee, since you can't go to a free pool and a free exercise room, add the fee for mowing the grass, and the security monitoring fee - now you are looking at $800 a month. Sure, you can save on the landscaping by doing it yourself and count that effort as equal to going to a health club. Oh, almost forgot - the condo fees often include things like cable or/and wireless internet, too. So add another $50 to your house payment. Honestly, the upkeep of a house is much higher than that of a condo, and you have more headaches and responsibilities.
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