Cooperatives

Financing a cooperative is typically cheaper than financing a condominium, but can be extremely difficult. In a cooperative, you do not own any real property but instead own shares in the cooperative corporation, which in turn allows you to “rent” your space. In essence, the only real collateral for the lender is your stock.

In the event that the building is foreclosed upon, the primary mortgage taken out by the cooperative organization will have to be paid first. Any additional loans given to the tenants will be considered secondary. The lender that provided the mortgage for the actual building will be paid, while the lender that provided the mortgage for the tenants' shares (i.e. your mortgage lender) may not be compensated if a foreclosure occurs. For this reason, many lenders shy away from financing cooperative loans. However, the National Cooperative Bank and others specialize in financing cooperatives.

When it comes to insurance, many of the same standards and issues that apply to condominiums apply to cooperatives. See Condominiums for more information.