Is it a red flag not to buy an apt in a co-op building that has a mortgage of $800,000 and loan due in 4 yrs.?

Asked by Rayray, Upper West Side, New York, NY Tue Jun 9, 2009

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Truett Hanke…, , New York, NY
Mon Jun 4, 2012
To be honest this doesn't seem unreasonable. As the brokers mentioned below you really need to take a look at the financials and see what it says. However if your asking, then I am guessing that maybe something raised a flag in your mind. So as I always tell my clients don't buy a place unless you can see yourself living there for 30 years. Because you want to really really make sure. So if you need any help or just want your questions answered call on me.
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Elena Ravich,…, Agent, New York City, NY
Fri Jun 1, 2012
I didn't see your coop's financials, etc but this amount of loan does not seem unreasonable (what do you think the value of the building is and what percentage of it is the loan?). It is common for coops to have a loan and keep on refinancing it. You have to look at the loan more closely, what is the current interest rate, etc. how is the debt service paid, from some additional income that the coop has, such as commercial rents or parking income, etc. or 100% of it comes from the maintenance payments?
What are the reserves of this coop? are there any assessments and how often they have them and for what purposes....
If the loan gets refinanced now they would probably be able to get a better than their current rate, as other brokers pointed out - you should check if they have any pre-payment penalties on this loan and would have to wait till the very end of the loan term to refinance it or can do it sooner.
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Lynne Figman, , New York, NY
Tue Jun 9, 2009
RayRay, Both of the brokers answers are correct. I am a real estate attorney (and broker) on the Upper West Side. This is a question that I have been getting frequently during the past year. I would add to the other comments that it is important that your broker get information on the history of the board and current composition *as well as any access to the minutes and financials* to give you an idea of how financially prudent and active the building has been in the past in ensuring that it finances on the most reasonable terms available. Also..to see if there has been discussion, in the minutes, about the board's intentions.

Feel free to contact me for 'free consultation!;
Lynne http://(www.LynneFigmanLaw.com)
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Weichert Rea…, Agent, Bronx, NY
Tue Jun 9, 2009
Hi Rayrat,

To add to what Chris said, A mortgage coming due in 4 years is not really a propblem, because they will refinance it by then. The question that should be asked is what is the interest rate of the building's mortgage and are they looking into refinancing now since the rates are low (which would be smart)? If you are using a Buyer's agent (which I always suggest), they should be looking into these things for you. Please let me know if you have any other questions. I can be reached at joegreene@weichert.com or on my cell at 917-974-2600.

All the best,

Joe Greene
0 votes
Chris L. Chr…, , New York
Tue Jun 9, 2009
Rayray,
The amount of the mortgage is not significant if the mortgage payment is affordable and paid each month.
Your accountant can quickly give you guidance as to the Coop's fiscal strength. Your mortgage lender will also review the coop's financials as part of their due diligence. You'll have good guidance when both your accountant and lender have completed their analyses.
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