Mortgages & Home Loans Real Estate Resources HOA Fees: What You Need to Know Before Buying Your Home By Justin Pritchard Justin Pritchard Facebook Twitter Website Justin Pritchard, CFP, is a fee-only advisor and an expert on personal finance. He covers banking, loans, investing, mortgages, and more for The Balance. He has an MBA from the University of Colorado, and has worked for credit unions and large financial firms, in addition to writing about personal finance for more than two decades. learn about our editorial policies Updated on May 13, 2021 Reviewed by Lea D. Uradu Reviewed by Lea D. Uradu Lea Uradu, J.D. is graduate of the University of Maryland School of Law, a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, Tax Writer, and Founder of L.A.W. Tax Resolution Services. Lea has worked with hundreds of federal individual and expat tax clients. learn about our financial review board In This Article View All In This Article HOA Overview 7 Ways HOA Dues Affect Finances Rules and Restrictions Photo: MoMo Productions Homeowners Association (HOA) dues are fees that homeowners in communities with HOAs pay for repairs, upkeep, and improvements in the neighborhood. For those who live in a condo or townhome, HOA dues may also be used for structural repairs and improvements. While HOA payments can add a large amount to your housing expenses, you may not realize this when you figure out how much your monthly mortgage payments will be. Before you commit to buying a property that's part of an HOA, get to know where your money goes and what to expect with your HOA dues. HOA Overview An HOA is a group of homeowners in the same neighborhood or building who share costs, set rules, and manage common areas together. For example, everybody who owns a condo in the same building is typically part of the same HOA. The HOA makes decisions about (and pays for) things, such as: Maintaining common areas like lobbies and community courtyards. Regular cleaning and landscaping. Repairs and upkeep. Parking lot maintenance. Additional amenities, such as pools or fitness centers. Rules governing what neighbors may do with their property, also known as covenants, conditions, and restrictions (CC&Rs). HOA Management Property owners could handle everything themselves. Yet with more than a handful of homes, it’s common to hire an HOA management company instead. The HOA board, along with other members, makes decisions and then delegates the daily duties of running the HOA to the management company. Note When you buy a home that is located in an HOA neighborhood, you do not have a choice as to whether you join. Once you purchase that home, you are a member of the HOA and must pay dues. HOA Dues Each homeowner pays HOA fees, typically monthly or every three months. Those funds go toward regular expenses. The HOA also sets money aside for future projects and emergencies by building up a reserve fund. Your HOA dues are paid in addition to your monthly mortgage payment. Seven Ways HOA Dues Affect Your Finances Before you commit to a home with an HOA, there are a few things you should know about HOA fees. HOA Dues Can Change HOA dues can go up or down. If that happens, you may have a hard time paying your home loan. HOA fees will rise when projects need funding, and they also may increase due to automatic inflation adjustments. Ask about the HOA’s history of raising fees, and find out about any planned projects or other changes in the works. Note As you prepare to buy a home with an HOA, you and your lender should evaluate the home's HOA dues to determine whether you can afford both the loan and the dues. The Dues Don’t Cover Everything Your HOA covers routine and planned costs. Often large projects and emergency repairs need immediate funding. In those cases, you may need to pay an additional special assessment. These assessments can cost several hundred dollars to several thousand dollars or more. HOAs Can Affect Your Credit When you buy into an HOA, you agree to pay HOA dues. If you don’t pay, you will owe the HOA money, and the HOA can send your past-due account to collections. The HOA can also put a lien on your property. Skipping HOA fees can even lead to foreclosure in some cases. Collection accounts and public records may appear on your credit reports, making it harder for you to get other loans or find housing in the future. You Pay for Things You Might Not Use HOA dues cover costs for common areas around your property, but you might not enjoy or even want all that you’re paying for. That’s a tradeoff of living in a shared space. For example, you might not use the pool or rooftop, but you need to pay for them anyway. You Probably Won’t Save on Taxes HOA dues are typically not tax deductible for the home you live in. If you own a rental property and pay HOA fees, you could get a tax break. The home office deduction might also provide some relief if you have an office in your home. Check with a CPA or tax preparer to find out whether you can get any tax savings for your HOA payments. You May Need to Pay Dues at Closing When buying a home with HOA dues, be ready to pay for every day you own the property, starting on day one. You may see a line item on your closing papers showing HOA dues. Note HOAs keep a reserve fund, which can help absorb large expenses and surprises. View HOA financial statements, and look at how much the reserve fund is before you buy a home with an HOA. A low reserve fund is a sign that dues may increase soon, and assessments are more likely when there’s no rainy-day fund. You Still Need Insurance HOA dues pay for a master insurance policy. But those policies typically don’t cover your personal property, the home you live in, the inside of your unit, damage that comes from your unit, or your personal liability. Speak with an insurance provider to determine what your risk is, and find out what type of policy makes the most sense for you. Price those policies before you buy an HOA-managed property so you have a clear picture of your future costs. Rules and Restrictions In addition to handling finances and maintenance duties, HOAs are tasked with setting and enforcing rules in your community. Note Get to know the rules and regulations before you buy your home, so you aren't surprised later. Examine the HOA’s CC&Rs, request recent meeting minutes, and look at homes in the area to determine how strict the rules are. Bylaws and CC&Rs can cover numerous topics, including: PetsSmokingMaintenance requirementsExteriors (including paint)Landscaping responsibilities and restrictionsParkingNoise limitsWhether owners are allowed to rent out units or notChanges and visible attachments to your homeBusiness use of your home In some cases, you’ll be glad there are rules. They may keep you safe, protect your home's value, and allow you to enjoy your neighborhood. Some rules may not work for you, and you need to know about any conflicts before you buy. At the end of the day, it’s your choice whether to buy a property or not. You get to decide whether you'll be able to follow the rules. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Consumer Financial Protection Bureau. "Your Mortgage Calculator May Be Setting You up for a Surprise." Consumer Financial Protection Bureau. "Are Condo/Co-Op Fees or Homeowners’ Association Dues Included in My Monthly Mortgage Payment?" Realtor.com. "A Homeowner's Guide to HOAs: Homeowners Associations, Explained." Nolo.com. "HOA Liens and Foreclosures: An Overview." IRS. "Home Office Deduction." May 12, 2021. H&R Block. "Does the IRS Consider HOA Fees Tax Deductible?"