What’s the Difference between HOA and CDD?

When buying a home in a planned unit development (PUD) that’s subject to HOA and/or CDD fees, knowing the differences between HOAs and CDDs can help you decide if a community governed by one or both of these structures is right for you. Although HOAs and CDDs are different entities, each with its own set of pros and cons, they may appear to have similar responsibilities. This could turn the home-buying process into a confusing journey for a person who intends to purchase a home in a planned development. To clear up any confusion, let’s find out the differences between an HOA and a CDD.

What Does an HOA Do?

Run by a board of directors, which is elected by the residents of the community, the HOA assists with the upkeep of different structures and enforcement of specific regulations within the neighborhood. Once you move into a planned development with an HOA, the membership becomes mandatory. As a result, you must pay a monthly, quarterly, or yearly HOA fee that is used to maintain specific communal areas and structures within the neighborhood. The fee is typically paid separately, meaning that it’s not included in your mortgage payment or property taxes.

A low-maintenance lifestyle isn’t the only benefit of living in a community with an HOA. The homes in these communities also tend to appreciate better over time compared to the homes located in neighborhoods without an HOA. That’s not only because these communities provide a series of amenities and services but also because the homes as well as communal areas are well maintained. Additionally, most HOAs impose strict standards that regulate exterior design elements. For example, by specifying the landscaping materials, exterior finishes, and paint colors that residents are allowed to use, an HOA can easily preserve the aesthetic quality and value of properties within the community.

Another important aspect you should be aware of is that the rules and regulations as well as the amenities and services offered by an HOA can vary widely from one community to another. If you currently live in a PUD that has an HOA but intends to buy a home in another HOA-governed neighborhood, it’s advisable to check the services and amenities provided along with the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) specific to that community.

What Does a CDD Do?

Governed by a Board of Supervisors, a CDD is a type of government entity, whose purpose is to finance, build, operate, and maintain community-wide infrastructure elements, improvements, and services for the benefit of the residents and properties within the community. CDDs are allowed to take out tax-free bonds in order to finance the cost of any infrastructure components and amenities necessary in the communities they run.

Because a bond is basically a loan, it’s paid back by the residents of the community, with each home being charged an annual amount, commonly referred to as a CDD fee. The CDD fee is included in the annual property tax bill, as part of the non-ad Valorem assessments. A part of the CDD fee goes toward the actual repayment of the bonds, which are generally paid off in 25 to 30 years, while the other part is used to cover the cost of operation and maintenance of specific infrastructure elements, such as roads, sidewalks, street lines, and utility lines, and amenities, like pools, gyms, clubhouses, parks, and playgrounds.

In a community that has both an HOA and a CDD, the CDD complements the responsibilities of the HOA. As a result, the homeowners who live in these communities can count on consistent high levels of public facilities and services.

Buying a home in a neighborhood that has an HOA, a CDD, or both can also save you a lot of money in the long run. Despite the fact that you’ll need to pay the HOA and/or CDD fees for as long as you live in the community, the amount is typically lower than what you would otherwise need to pay in order to get the same amenities and services separately. For instance, you might not be able to afford a personal gym and a pool. But in exchange for an HOA and/or CDD fee, you can live in a beautiful neighborhood and benefit from a wide range of amenities and services at no extra cost to you. 

Although there are some undeniable advantages to living in a PUD run by an HOA and/or a CDD, these communities aren’t a good fit for everyone. Regardless of whether you intend to purchase a home in a community with or without an HOA and/or a CDD, we’re ready to help you find the right Florida mortgage for you! You can use our online form or contact our professionals who will do their best to make your mortgage application as enjoyable as possible!

Checklist to Buying a Home

Leave a reply

Your email address will not be published. Required fields are marked *