Co-ops are very common in New York City. They differ from condos in that they are owned by an apartment corporation. An individual purchasing a co-op is purchasing shares of the building’s corporation and is known as a shareholder. Shareholders in the corporation are then entitled to a long-term proprietary lease. Shareholders cannot have their lease terminated as long as they abide by the terms of the lease. Co-ops are not subject to real estate laws so there are no deeds, mortgage notes or title insurances.

An individual shareholder owns a percentage of the total shares within the corporation. The larger the apartment, the higher the percentage of shares the individual will own.
Co-op owners pay a monthly maintenance fee to cover their portion of the co-op’s management and operating costs. Since maintenance fees include real estate taxes and insurance, as well as principal and interest on the underlying mortgage, portions of the monthly maintenance fee are tax deductible (consult with your accountant for details).

The process of buying a co-op also varies from a typical home purchase. The co-op’s Board of Directors must interview the prospective buyer and perform a financial screening. The Board sets a minimum down payment, usually between 20-25% of the purchase price. Some co-op boards require as much as 50% down in the more affluent areas of New York City.

To obtain financing for a co-op, the loan must conform to the amount of financing that is acceptable under the terms of the board’s agreement. The loan is then secured against the shares that the buyer is purchasing in the co-op.

Preferred Empire Mortgage can offer a variety of programs to help you obtain financing for a co-op. We work with over 50 mortgage lenders so we can offer the most competitive rates to suit your financial needs.