Condo vs. apartment: What’s the difference?

A condominium and an apartment may look and seem a lot alike. Both typically exist as a unit within a larger building or complex with shared spaces and amenities. Unlike a single-family home, you aren’t responsible for the maintenance and upkeep of the exterior structure and landscaping.

While there are many similarities between condos vs. apartments, the biggest difference is that apartments are rented and condos are purchased. This means that condo owners get the opportunity to build equity over time. Let’s take a closer look at the differences between condos and apartments to help you decide which might be the right home choice for you.

Key differences between condos and apartments

The biggest apartment and condominium difference is that a condo is purchased and the owner builds equity, while an apartment is rented and the tenant builds no equity. Another difference is that renters have lower maintenance costs and greater flexibility. Condos and apartments differ in various ways, but the most significant apartment condominium difference is ownership.

Ownership

Condos are owned, and apartments are rented. That means when you buy a condo, you build equity over time. Renting an apartment does not build equity. A condo also requires a greater vetting process for financing, while renting an apartment is typically much easier.

Cost

The difference in cost isn’t just a mortgage payment vs. a rent payment. There also are differences in up-front fees and recurring costs. Mortgage payments on a condo can be higher or lower than apartment rent, depending on interest rates, home prices, and the rental market.

Condo costs

Here are some of the costs of buying and owning a condo:

• Down payment. A down payment is a percentage of the condo’s purchase price that you pay out of pocket that you pay upfront.
• Monthly mortgage payment. Your monthly payment may include principal and interest, along with homeowners insurance, property taxes, and private mortgage insurance.
• Homeowners insurance. Most mortgage lenders require homeowners insurance to protect their investment by covering damage caused by certain natural disasters, fire, and vandalism.
• Property taxes. Every homeowner pays property taxes, which fund local services, like public schools, police, and fire safety.
• Utilities. As the property owner, you are responsible for paying for utilities such as water, gas, electric, and trash collection.
• HOA fees. Many condos will have a condo association or HOA that collects fees from all its members. These fees help pay for amenities, community services, and maintenance of shared areas.
• Maintenance. You’ll also be responsible for routine and emergency maintenance repairs.

Apartment costs

Renting an apartment typically comes with lower costs because the landlord is responsible for maintenance, property taxes, and homeowners insurance. However, some expenses are unique to apartments.

• Security deposit. A security deposit is an upfront fee you pay when you first sign your lease. This is kept by the landlord to pay for any damage that’s found after you move out. If you leave the apartment in good condition, you should get this deposit back.
• Monthly rental payment. Your monthly rent is laid out in your lease and cannot change until your lease term is up.
• Rental insurance. Rental insurance usually is optional, though landlords can sometimes require it. It protects your personal property from unexpected loss.
• Utilities. The landlord may cover some utilities, but you’re often responsible for paying for your electric bill and other utility costs.

Maintenance

In an apartment, the landlord typically is responsible for repairs. However, you should be familiar with your lease to understand what maintenance you might be responsible for. In a condo, the owner is responsible for maintaining the interior of their unit, while the HOA is responsible for maintenance costs for common amenities and the building exterior.

Amenities

Apartments and condos often feature amenities such as pools, fitness centers, community spaces, and parking. The amenities will differ for each property, so you’ll want to find one that fits your preferences in home features. Keep in mind that the implications of amenities are different for renters and condo owners. A condo with a pool may require higher HOA fees, whereas apartment amenities are included in rent.

Rules and regulations

While owning gives you more freedom, condos typically have a condo board, cooperative, or HOA that sets rules you’ll need to follow. Apartments may not have HOAs, but the landlord or property manager may set rules you must follow as to how you can decorate and set up your space.

Advantages and drawbacks of buying a condo

It’s important to weigh the pros and cons of condo living before buying one.

Advantages of buying a condo

A condo allows you to own the place you’re living without some of the disadvantages of single-family homes or apartments.

• Building equity: Unlike renting an apartment, buying a condo allows you to build home equity. Each mortgage payment you make gives you greater stake in the property. When pay rent, you don’t build any equity.
• Freedom to customize: You have much more freedom to customize your living space than you would in an apartment, as long as you follow HOA rules.
• Stable housing payment: If you have a fixed-rate mortgage, your monthly mortgage payment will be more predictable.

Drawbacks of buying a condo

There also are drawbacks to condo living that you should consider.

• Maintenance costs: When you rent, maintenance and repairs fall on your landlord. With a condo, you have to handle these fixes – and the costs – yourself. Depending on the age or quality of your condo, these maintenance costs can be significant.
• HOAs can be strict: HOAs have rules, covenants, and guidelines that can limit what you can do with your condo. Make sure to assess the HOA before you buy a condo so you know what you’re getting into.
• Significant upfront costs: When you buy a condo, you’ll need a down payment and must pay closing costs, which can run 3% – 6% of the sale price.

Advantages and drawbacks of renting an apartment

Apartment living can offer flexibility and affordability, but less freedom to make your living space completely your own.

Advantages of renting an apartment

When you rent an apartment, you have less responsibility and commitment.

• More flexibility: Renting an apartment usually means you’re usually tied to your lease for only a year or so. It’s much more challenging to sell a condo than to end a lease, and selling a condo after only a few years may come with a significant financial cost.
• Fewer maintenance costs: When you own a home and your furnace breaks, you have to pay to replace it. In an apartment, that responsibility falls to your landlord.
• Limited upfront costs: It’s common that your only upfront costs to rent an apartment are the security deposit and first month’s rent. That’s typically much cheaper than a down payment and closing costs on a condo.

Drawbacks of renting an apartment

While apartment living may save you some money, there are drawbacks.

• No return on investment: When you own a condo with a mortgage, part of your monthly payment goes toward paying off your loan and building equity in the home. When you rent, your monthly payment goes to your landlord.
• Major limitations on renovations: Because you likely won’t stay in the same apartment forever, landlords want to keep their apartments in good condition for the next tenant. To do so, they often have rules on customizing the space.
• Less stability: When renting an apartment, you’re guaranteed to stay in your home only for as long as your lease allows. Your rent may increase from year to year, or the landlord may refuse to renew your lease for any reason.

The bottom line: Condos are owned and apartments are rented

Apartment living and condo living may look similar, but there are financial implications to renting or buying. The main difference between the two is that you own a condo and rent an apartment. Renting provides short-term flexibility and fewer maintenance burdens. Buying a condo allows you to build equity with each mortgage payment.

Choose the option that fits your goals and lifestyle, and you can start your journey with the Rocket Mortgage application.