What loan to buy a cooperative apartment?
Is your dream new housing a cooperative apartment and you despair because you have heard that it is not possible to finance the purchase of a cooperative apartment with a mortgage? There’s no reason! A mortgage loan contract can be obtained even if you do not become the owner of the property immediately. And there are other ways to get the money you need.
After all, the mortgage?
The basic problem of a co-operative flat is that by buying it you are not becoming the owner of the property, but only a share in the co-operative with the right to lease the given residential and non-residential premises. That is why it is not possible to take a mortgage loan to buy such an apartment if you need to use the newly acquired property as a security. It is not possible to get a loan for a cooperative apartment.
The solution is to use another property as collateral. Do you own a cottage, cottage, land? If their value reaches the value of a new apartment, you have problems. Even the ownership of the property is not a condition. For example, parents can guarantee your house or apartment. This solution even has one advantage. If it is possible to pledge a property of significantly higher value than the purchased apartment, you can achieve a significant reduction in interest on the mortgage.
There is one more option. You will receive a confirmation from the housing co-operative that within one year of signing the loan agreement, the apartment will be transferred to private ownership. You can then apply for a pre-mortgage loan to help you overcome this transition period. During it you will only pay interest. After that, you will pay the entire pre-mortgage loan with a new mortgage. However, you have to reckon with the fact that you pay the bank a little more on interest than a conventional mortgage.
Do you have building savings? Use it!
Building savings can also be used to finance the purchase of a cooperative apartment. Classic building savings loan is tied to real estate collateral, so you will probably not reach it. But there is a bridging loan. In the case of a classic building savings loan, you only draw the difference between the amount you have already saved and the target amount. With a bridging loan, the Bank will provide you with the entire amount of up to two million dollars. You will continue to save up to the target amount, but will also pay interest on the entire amount borrowed. However, it should be borne in mind that this will have an impact on the amount of interest.You start paying the amount owed only when you reach the conditions of a classic building savings loan.
Another type of loan
In order to complete the list, there are also various types of consumer loans. However, there is a significantly higher interest rate and it is usually not possible to borrow a larger amount so that the whole apartment can be paid. Given the significantly shorter maturity of such a loan, it is important to consider the ability to make high monthly installments. The solution is such a loan only when you have saved enough money and the target amount you are missing only a few hundred thousand dollars.