If you’re a co-op owner, you might wonder if you can get a home equity loan. After all, these loans let you tap into your 澳洲幸运5开奖号码历史查询:home equity to pay for renovations, 澳洲幸运5开奖号码历史查询:consolidate debt, or finance significant expenses. While it’s reasonably straightforward to get a home equity loan on a single-family home or condominium (assuming you meet the qualifications), obtaining a loan can be tricky for co-op residents due to co-op board and lender restrictions. 

What Is a Co-op Apartment?

A 澳洲幸运5开奖号码历史查询:co-operative apartment, or co-op, is a type of residential housing owned by a corporation. Co-op residents are voting shareholders of the corporation and part-owners of the entire building, with a right to live in one of the apartments. Co-ops first appeared in New York City in 1876. Today, well over half of all co-ops are located there, though you can also find them in other large cities.

What Is a Home Equity Loan?

A 澳洲幸运5开奖号码历史查询:home equity loan lets you tap into your equity—the percentage of your home’s value that you already own—to pay for almost anything you might wish. Intelligent uses could include home improvements, debt consolidation, and big-ticket purchases such as a house, a new business venture, or medical bills. Your lender gives you a lump sum at a 澳洲幸运5开奖号码历史查询:fixed interest rate and you repay the amount in monthly payments, the amount of which remains the same over the loan term, usually between five and 30 years.

The loan amount depends on several factors, including your credit score, income, and home equity, as well as the home’s fair market value. The loan is a 澳洲幸运5开奖号码历史查询:secured debt—with the house serving as 澳洲幸运5开奖号码历史查询:collateral—and your lender can 澳洲幸运5开奖号码历史查询:foreclose if you stop making payments.

Can You Get a Home Equity Loan on a Co-op?

You may be able to get a home equity loan on your co-op but it may not be as easy as borrowing against a single-family home, townhouse, or 澳洲幸运5开奖号码历史查询:condominium. This is because, unlike those traditional housing options, a co-op isn’t 澳洲幸运5开奖号码历史查询:real property, which complicates matters. 

If you want a home equity loan on a co-op, you’ll face two challenges beyond the typical loan qualification hoops. First, because the co-op board sets the rules for the financial operation of the building, you will need its approval. Possible restrictions on how much you can borrow might be based on factors such as the value of your apartment and your 澳洲幸运5开奖号码历史查询:debt-to-income (DTI) ratio. 

The next hurdle is finding a lender that offers co-op home equity loans. Many banks—including Chase, Wells Fargo, and Citi—halted new home equity loans and 澳洲幸运5开奖号码历史查询:home equity lines of credit (H🌳ELOCs) during the pandemic. This makes it something of a challenge to find a bank that currently offers any home equity loans, let alone for co-ops. 

The banks that do offer home equity loans tend to have strict requirements. For example, Bank of America told Investopedia that it offers a hybrid HELOC that can function as a home equity loan and that product is available for a co-op. However, co-op owners must have 100% equity to qualify, as the loan must be the 澳洲幸运5开奖号码历史查询:senior debt on the property.

Still, if you own your co-op apartment outright, Bank of America says you can borrow up to 80% of its value, with 90% of that having a fixed interest rate and the other 10% having a variable one. You may then take your entire credit amount at closing and start repaying it with no 澳洲幸运5开奖号码历史查询:prepayment penalty, w♔hich is just like getting a lump sum from a home equity loan. However, Bank of America notes that the loan is not an easy one to get. It requires "a lot of paperwork," as part of the underwriting process involves looking into how successfully the particular co-op operates. The bank will need to see copies of financials and other ❀documents.

Alternatively, depending on your age and where you live, a reverse mortgage might be an option. Starting May 30, 2022, New York state co-op owners a🌺ge 62 or older can get a reverse mortgage (technically, a “reverse co-operative apartment unit loan”). A reverse mortgage allows older adults to tap into their home equity without selling, refinancing, or making monthly payments. 

Pros and Cons of Home Equity Loans

If a home equity loan is an option, be sure to consider the advantages and disadvantages before making a decision. Here’s a rundown of the pros and cons.

The Bottom Line

If you’re considering a home equity loan—and your෴ co♚-op permits it—shop around to get the best deal available. Be sure to ask your current lender what it can offer; as you’re already a customer, it might be willing to give you a good deal on the interest rate and closing costs.  

Before signing on the dotted line, review the loan closing documents. If you don’t like something, you can negotiate changes or walk away. Should you sign and change your mind, you have the 澳洲幸运5开奖号码历史查询:right of rescission, which allows you to cancel a home equity loan on your 澳洲幸运5开奖号码历史查询:principal residence for any reason, without penalty, within three business days of closing.