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Townhouses are a common type of housing, and you’ve almost certainly seen your share of townhouse communities — or, at the very least, a row of townhomes lining a street — where you live. This distinct building style shares many similarities with detached homes and condos, but there are also a number of features that set townhouses apart.
Here’s what you need to know about townhouses and how they compare to condos and single-family houses:
- What is a townhouse?
- Townhouse vs. condo vs. house
- Pros and cons of a townhouse
- Tips for buying a townhouse in 2021
- Should I buy a townhouse?
What is a townhouse?
A townhouse is an individually owned, residential home — usually multi-level — that shares a wall with at least one other home. Because they’re often constructed side by side, townhouses are sometimes referred to as row houses, particularly when located in a dense urban area.
The owner of a townhome owns both the structure and the land it sits on. In some cases, townhouse clusters are part of a larger townhome community, which is often managed by a homeowners association that sets the rules for the community, collects membership fees from the homeowners, and arranges for maintenance.
Townhouse vs. condo vs. house
Although townhouses, single-family houses, and condos all serve as residential homes and can be financed with a mortgage, they’re actually quite different. Here’s a breakdown of the primary differences between these three property types:
| Townhouse | Detached house| Condo |
| |
|---|---|---|---|
Type of ownership| Fee simple ownership: includes the structure and the land | Fee simple ownership: includes the structure and the land | Condo ownership: includes the space inside the condo but not the outside space or land |
|
| Cost to buy | Usually costs less than a detached house but more than a condo | Usually the most expensive option | Usually the least expensive option |
| Finance | Standard mortgage financing | Standard mortgage financing | Subject to financing restrictions |
| Neighbors | At least one shared wall | No shared walls | At least one shared wall |
| Upkeep | You’re responsible for the exterior and interior of your home, plus any shared walls. | You’re responsible for all maintenance | You’re only responsible for interior maintenance, such as plumbing; the condo association takes care of common areas |
| Insurance | Standard homeowners insurance required | Standard homeowners insurance required | Condo (HO-6) insurance required; condo association policy insures common areas and exterior of building |
| Amenities | Sometimes includes amenities, if part of a planned community | Sometimes includes amenities, if part of a planned community | Often includes amenities |
Any property you buy has rights of ownership associated with it, but some properties have more rights than others:
- Fee-simple ownership: When you buy a detached home or townhome, you receive fee-simple ownership. This is the least restrictive type of ownership. It allows you to use your house, yard, and any other structures on your land as you wish, as long as you act within the law and abide by HOA rules, if applicable.
- Condominium ownership: Condo owners have fewer ownership rights than owners of houses and townhouses. What they own individually is the space between the exterior walls of their unit, but not the exterior structure of the unit. They might also be entitled to exclusive use of amenities, like a patio or parking space, located in a common area but reserved specifically for their own use.
Read: Condos vs. Houses: How to Decide
Financing
Detached homes and townhouses are generally easier to finance than condos are. That’s because when you buy a detached home or townhouse, you buy the house and land it sits on.
When you buy a condo, the agency backing your mortgage loan — Fannie Mae, for instance — must approve or “warrant” the building or community before it’ll sign off on financing. When it does, it’ll likely be at a higher interest rate than you’d get with a house or townhouse.
Pros and cons of a townhouse
Every type of home has pros and cons. Here are some to consider before you buy a townhouse:
Pros
- Less expensive than a detached home
- Same financing options and ownership rights as a detached home
- Less yard to maintain
- A sense of community
Cons
- Less privacy than a detached home
- Often subject to HOA restrictions and fees
- Limited yard size
- Fewer style choices
Tips for buying a townhouse in 2021
The process of buying a townhouse compared to a single-family house is relatively similar, but you’ll want to be especially considerate of the following:
- Budget: In addition to the home price and closing costs, factor in HOA fees. Make sure these costs don’t send you over budget.
- HOA: An HOA protects a community’s property values by enforcing certain standards. These standards include appearance and upkeep of your unit, the kinds of structures you can construct in the yard, and whether you can keep a boat or RV on your property. Ask yourself if these policies are overly constricting.
- Amenities: Amenities like a pool, fitness center, and clubhouse can make a townhouse community a more enjoyable place to live, but you’ll pay to maintain them as part of your HOA dues. Decide whether you’d use them enough to justify the expense.
- Neighbors: Because townhouses are attached, you’ll share walls with at least one neighbor, and you’ll live in close proximity to all your neighbors. Living so close together can foster a sense of community, but you may not be comfortable with the noise or lack of privacy. An end unit will give you slightly more privacy.
- Future plans: Consider your life stage and think about how happy you’ll be in a townhouse over the long term. Ask yourself if it will suit your needs a few years from now, and take into consideration your family and financial goals.
Should I buy a townhouse?
A townhouse could be a great choice if you’re seeking a smaller home with a yard that requires minimal upkeep. Perhaps paying HOA dues and the lack of privacy are small compromises when compared to the benefits of owning an easy-to-maintain home in full.
If, on the other hand, the thought of homeownership conjures images of lots of space and privacy, where you can do whatever you want without neighbors or HOAs interfering, a detached home might be a better choice.
And, if all exterior maintenance is a deal breaker, consider buying a condo instead.
If you’re looking to purchase your home the traditional way, Credible can help you compare prequalified rates from all of our partner lenders in just a few minutes. It’s simple and secure — and you don’t even have to leave our platform.
