How Co-op Boards Can Prepare
As a member of a housing co-op, there are a lot of financial balancing acts to manage. Making decisions within the co-op board about an underlying co-op mortgage means everyone needs to know every detail.
What does it mean to take on an underlying co-op mortgage? How do you refinance an underlying co-op mortgage? There are a lot of major issues you can run into in commercial real estate finances if you don’t ask questions first.
We here at Aurum & Sharpe are here to guide you through this big process. Let’s begin.
Breaking Down the Basics on How to Refinance Underlying Co-Op Mortgage
First, the basics. An underlying co-op mortgage shres a lot of basics with a residential mortgage but operates at a commercial level. This means it deals with the building as a whole, not one resident.
For a commercial level mortgage, there are a few extra terms and ideas that you must understand. Interest rates are also a common concern, but they may not be where you should focus.
1. Usual Terms for an Underlying Co-Op Mortgage
Basic ideas like prepayment, amortization, and fees still apply. One unique aspect of an underlying co-op mortgage is that they are often made for 10-year repayments instead of 20 or more.
This shorter-term often removes the self-liquidating factor, meaning that after the 10 years, your co-op mortgage may still have an outstanding balance. That is when you then refinance your co-op mortgage. That is the typical breakdown of an underlying co-op mortgage.
2. Interest Rates Vs. Flexibility
When looking at large mortgage like this, many opt to find the lowest interest rate. Lower interest rates, though, often mean investors will remove flexibility to the loan as a result. This can be dangerous.
Flexibility means you are able to make prepayments to the mortgage when you have extra money to spare. This gives you a lot of breathing room when the inevitable happens and you need to make a major upkeep or repair cost to the building.
Backup Finances
Often the savings you may get in lowered interest rates will be better in the long term but the heavy hit of a sudden major repair cost in addition to mortgage payments can be devastating in the short term.
There is a way to balance both low interests and flexibility. Securing other sources of credit or savings to stave off accidents and issues can help give you time to reap in the benefits of lower interest rates.
Getting the Best Underlying Co-Op Mortgage
When finding the best underlying co-op mortgage for the entire co-op board, remember what we broke down.
You need to balance a low-interest rate with the flexibility of prepayment. You need to understand the differences in loan terms and when you should refinance in the future. You need to remember to consider extra lines of credit to support potential damages and upkeep.
Shopping around for the best rates and reliability can take some time. You can save a lot of time by heading to us here at Aurum & Sharpe, where we provide some of the best balance of rates on any underlying co-op mortgage.
Keeping Informed on Your Co-Op Finances
We hope this gives you a better understanding of all the details that go into an underlying co-op mortgage. Now you and the rest of your co-op board can make a proper decision on what is best for your co-op.
When you are ready to take the leap into your underlying co-op mortgage, we here at Aurum & Sharpe are ready to help. Contact us today to begin!