Cooperative mortgage

What is a cooperative mortgage?

A cooperative mortgage is a type of loan that allows the borrower to purchase shares of a cooperative housing project. In this type of mortgage, a corporation retains ownership of the property, and residents use their purchased shares to remain in the property.

Deeper definition

This type of mortgage specifically handles mortgage payments for a cooperative ownership where a single entity or corporation owns the property but the residents own shares in the corporation.

In conventional mortgages, a buyer borrows money from a financial or housing institution in order to purchase a real physical property that he can put under his name.

In a cooperative mortgage, the company or corporation retains ownership of the property and the borrower takes a share loan to obtain a propriety lease of a certain portion of the property that’s equivalent to the value of his or her shares in the cooperative.

Cooperative mortgage example

Depending on the borrower’s needs, a cooperative mortgage may be more beneficial than a conventional mortgage because the shares can be used as loan collateral in case the borrower falls behind in his or her loan payments.

Cooperative mortgages also may provide a certain degree of flexibility because those who have more shares in a cooperative can lease a bigger unit, while those who have fewer shares can lease a smaller one.

There are different types of co-ops with different terms, conditions and provisions. Some provide their partners with the freedom to determine the buying and selling prices of their shares, while others set restrictions on how much partners can sell.

Just like regular mortgage where borrowers pay property taxes, owners of cooperative mortgages also have to pay property taxes. The payments are made directly to the corporation, which collects them from the borrowers on behalf of the government. As with other mortgage types, payment of property taxes can be claimed toward the borrower’s income tax return.

Use this mortgage calculator to see an estimate of your monthly mortgage payments, depending on the loan amount, term and annual interest rate.