Thinking about buying a condo? Condo living often comes with its own set of perks, including a low-maintenance lifestyle—but it also entails unique responsibilities.
It may be wise to familiarize yourself with what potential fees you'll face before committing to condo living. At Newrez, we’re no strangers to the quirks of buying a condo. We’ve created this guide to help you demystify condo fees so you can avoid surprises.
Click to navigate:
What Are Condo Fees?
What Do Condo Fees Cover?
How Are Fees Calculated?
What Are Reserve Funds?
Pros and Cons of Condo Fees
Tips Before You Buy
Newrez Carries Condo Loans
Frequently Asked Questions
Condo fees support various aspects of the condominium’s operations. Some condo fees are paid on a monthly basis, while others are one-time fees. They include, but may not be limited to:
- Homeowners Association (HOA) Dues: These monthly fees are paid to the condo Homeowners Association and typically cover things like maintenance, landscaping, shared amenities and insurance for common areas. Newrez will include these costs when calculating how much mortgage you can afford.
- Special Assessments: These are one-time fees that the HOA might charge to cover unexpected repairs or major improvements like roof replacements. These fees may be hundreds or even thousands of dollars. Be sure to ask about any upcoming special assessments before you buy.
- Other Potential Fees: You may encounter other costs such as transfer fees, move-in or move-out fees, parking or storage rental and administrative charges. Be sure to review the full fee schedule.
What Do Condominium Fees Usually Cover?
Condo fees are meant to pay for property upkeep and shared services for all condo residents. This may or may not include:
- Exterior maintenance (roof, façade, windows, paint)
- Landscaping and snow removal
- Common utilities (water, gas and sometimes electricity)
- Building insurance for shared spaces
- Maintenance staff
- Shared amenity upkeep (fitness centers, pools, clubhouses)
- Elevator maintenance and inspections
- Security personnel
- Reserve funds
How Are Condo Fees Calculated?
The HOA or condo board usually prepares an annual budget and then divides total operating and reserve fund costs across condo owners, typically proportional to unit size or ownership share.
Factors that may impact fees include:
- Square footage of your unit
- Total number of units
- Type and quantity of amenities
- Building age and condition
- Location and cost of living
- Insurance and utility rates
The Role of Reserve Funds in Condo Fees
Many condominiums maintain a reserve fund, which is a savings account meant to cover capital improvements and emergency repairs. This sometimes helps avoid sudden special assessments when costly projects arise.
Common uses for reserve funds include:
- Roof replacements
- Structural upgrades
- Lobby and hallway renovations
- Parking garage resurfacing
- Elevator replacement
- HVAC system upgrades
The Pros and Cons of Condo Fees
When you’re weighing the advantages and downsides of condo living, monthly fees may be a major factor in tipping the scales. Condo fees fund resident benefits, but some may not want the extra monthly cost.
Pros:
- Maintenance-Free Living: A major plus side to owning a condo is not worrying about maintaining a yard or paying for repairs on your own.
- Amenities: You may get access to gyms, pools and other communal conveniences.
- Preserved Property Value: Well-maintained common areas may help retain home value.
- Collective Buying Power: Homeowners associations negotiate contracts with service providers that could result in lower individual costs than if you were booking these services yourself.
Cons:
- Adds to Monthly Housing Costs: Fees count toward your mortgage qualification.
- Fees May Increase: Inflation and service upgrades could lead to annual hikes.
- Mandatory Even When Unused: You pay whether you use the amenities or not.
- Risk of Special Assessments: Unexpected costs (ex: roof replacement) may lead to one-time charges.
- Shared Liability: Non-payment by others may impact your financial obligations.
Has a particular community caught your eye? Make sure you’ve given them a close review before signing on the dotted line. Your real estate agent may help you track down some of this information:
- Review HOA Budgets: Get a good idea of how financially healthy the HOA is.
- Request Recent Meeting Minutes: Acquaint yourself with the building’s goings on, including disputes and upcoming assessments.
- Check Insurance Coverage: Know what the policy covers and what it doesn’t.
- Understand Fee Inclusions: Look over a line-item breakdown of what fees cover.
- Ask About Delinquency Rates: High delinquency may indicate financial problems.
Newrez Carries Condo Loan Products
Ready for condo life? Newrez has loans to fit your circumstances. You may be eligible for:
- Conventional loans (for condos that meet certain eligibility requirements)
- Financing for a non-warrantable condos
- Low down payment options
- Jumbo loan options
Reach out to a Newrez mortgage expert to learn more.
This is not a commitment to lend. All loan programs are subject to credit, underwriting, and property approval. Programs, rates, terms and conditions are subject to change without notice. Other restrictions apply.
Frequently Asked Questions
- Can Condominium Fees Increase Over Time?
Yes. Condo fees may increase for many reasons, including but not limited to to rising maintenance and utility costs, new amenities or services, inflation adjustments and reserve shortfalls. Owners are typically notified through annual budget meetings and HOA communications.
- Are Condominium Fees Tax Deductible?
In most cases, no. Condo fees are considered a personal expense and not tax-deductible for primary residences. However, if you rent out your unit, fees may be deductible as a business expense.
- Are Condo Fees Refundable When You Sell?
Generally not. However, prepaid fees may be prorated in your closing statement.
