Most underlying co-op mortgages have shorter terms than residential mortgages, with balloon payments typically due at the end. The shareholders of large co-ops often decide to refinance their mortgages as their current mortgage nears its end.
Refinancing a large co-op is common in New York, usually to obtain an improved mortgage rate or borrow more money. If you and the board of directors have plans to refinance your underlying co-op mortgage, consider the following points.
Closing costs
Generally, the closing costs associated with co-op refinancing should total between three and six percent of all costs. Higher closing cost percentages could mean refinancing the co-op is not worth the effort. Aim to reduce your refinance rate by about three-quarters of a full percent, on average.
Building inspections
Although it may cost to get professional property or building inspections, it is nearly always worth the expense. These inspections can reveal problems with the building, allowing the co-op to address them. Property kept in good condition usually leads to better refinancing rates as well.
Proper documentation
The lenders you consult with will likely request detailed information about the building, the shareholders and other aspects of the co-op. Gathering these details in advance saves time and ensures you have the paperwork your lender will need to facilitate the refinancing process.
Refinancing a large co-op is one of the most complex real estate transactions you may ever undertake. If you overlook any detail, it could result in substantial delays or failure to refinance the property. Knowledge of real estate law and guidance from a professional can help you avoid costly refinancing pitfalls.