9.19.22

Understanding the Cost of Homeowners Associations

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Learn how an HOA can affect your budget with these seven FAQs.  

If you’re shopping for a home, it’s likely that you’ve seen homeowners association (HOA) fees in some of the listings. However, if you’re new to home ownership or HOAs, you might not know how this expense can affect your budget. Read through the following frequently asked questions about the costs of HOAs for condos and neighborhoods with single-family homes.

Are HOA fees included in mortgage payments?

HOA fees are paid to the association and generally are not included in your mortgage payment. However, some lenders may require HOA fees to be paid into escrow to ensure that payments are regularly made.

How much do HOA fees run?

There is no standard amount for HOA fees; they vary by community. Many HOAs charge $200-$300 a month, which often includes things like trash services, lawn maintenance and snow removal. If you join an HOA that offers more amenities, such as a gated entry, pool, clubhouse or golf course, fees could be much higher.

Generally, part of the fee goes toward operating expenses and another part goes to reserve funds. HOA reserve funds are used to cover emergencies as well as planned replacements for things like roofs, plumbing and exterior building maintenance.

Can HOA fees change?

HOA fees can increase each year to cover rising expenses.

Will there be additional HOA charges?

If you buy a home that’s part of an HOA, you can count on paying dues every month for as long as you own the home. There could also be other HOA costs that affect your budget, including paying fines for violating HOA rules.

Homeowners may also be required to pay more than the monthly or quarterly fee due to an assessment. HOAs implement assessments when they have unexpected expenses that aren’t covered by the budget and reserve fund. For example, if a fire causes damage and the association’s liability insurance substantially increase, all homeowners could be assessed to cover the additional premium. Assessments are not permanent. Once the finances are accumulated, the assessment is removed.

What if I don’t pay required HOA fees or assessments?

Initially, unpaid HOA fees will result in a notice from the association. If the dues and other fees remain unpaid, the association may foreclose on your home to collect unpaid fees.

Are HOA fees tax deductible?

HOA fees are not considered a tax-deductible expense. However, if they are associated with a rental property, HOA fees would be considered an expense for tax accounting. As always, we encourage you to consult with a knowledgeable tax advisor about your individual situation.

Are HOA fees negotiable?

HOA fees are set independently by each association’s board. They are not negotiable.

HOA fees definitely affect the cost of home ownership and must be factored into your home buying decision. Before you begin your homeownership journey, discover Consumers’ custom-made mortgages and experienced mortgage professionals and learn more about current rates.

Consumers helps more than 2,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.

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Consumers home loans

We’d love to help you with a mortgage or home equity line of credit.

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