Financing a Co-op

Financing a co-op can be difficult because this unique form of ownership is not considered as holding real property.  Co-ops are buildings communally owned by a corporation. Each owner receives shares of stock in the corporation, and the building often resides on leased land.

Financing a Co-Op with a Share Loan

You can’t get a mortgage on a co-op because mortgages are reserved for real property.  However, co-ops can be financed with a share loan.  With a share loan, the lender holds a proprietary lease & stock certificate as collateral. Ask your lender and Realtor about co-op financing. If you discover a co-op that does accept financing, ask the board which lenders they have worked with in the past. Co-ops can be financed, it just requires a little more research.

Financing a Co-Op is Rare

Most co-op purchases are cash. Very few lenders will finance co-ops in Florida, and very few co-ops will accept financing as an option.  Most co-op boards are not willing to take on the risk of default and the communal disturbances that accompany a foreclosure.  You will probably be required to put down a higher down payment and show proof of sufficient liquidity to cover carrying costs for a few years if you do find a co-op that accepts financing.

Co-Op Foreclosures

It is much easier for a lender to foreclose on co-ops than it is for real property.  A bank can conduct a foreclosure sale on a co-op without a judge’s approval.  All the lender has to do is publish a foreclosure notice in a local newspaper for three weeks before holding an auction.  If the co-op unit fails to sell at auction, the bank will take possession.