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When you purchase a co-op, you become a shareholder in a corporation that owns the property. As a shareholder, you have secured the exclusive use of a housing unit located on the property.

To purchase shares in a co-op, each buyer takes out a “share loan” in the form of a mortgage. The share loan pays the cost of buying into the partnership. These loan payments are repaid to the lender, and co-op residents are also responsible for paying a pro-rata share of the costs of running and maintaining the building. Known as the “maintenance,” these costs are paid to the partnership monthly and charged on an at-cost basis. Prices rise when the cost of goods and services go up.

The property’s mortgage may also be included in the monthly fee: Even if an individual tenant has paid off his or her share of the loan, it’s possible for the building itself to have a mortgage on it, held by the corporation, not by an individual partner. Buyers are entitled to all of the tax deductions enjoyed by homeowners, including the deductions for interest and real estate taxes.

Types of Loans

Understanding the types of loans available is a daunting task. MortgageDepot can help buyers grasp the difference between these types of mortgages:

• Comparative Market Analysis: This tool uses information from recent sales of similar properties in the area to determine the market value of your home.
• Free Property Appraisal: This tool provides insight on the amount of money that a bank may lend to a buyer to purchase a property.