How to Refinance a Co-Op Property

Many farmers rely on cooperative properties to make their business run.

When interest rates for property loans get low, refinancing often comes up among cooperative owners. Deciding to refinance a co-op property can be more difficult than a property with a single owner because of the multiple hands involved. A co-op board will have to assess the situation and decide when refinancing is the right way to go. But the process of refinancing a co-op property isn't much more complicated than any other mortgage needing refinancing.

Instructions

1. Review your current mortgage's terms. Your co-op may not be allowed to refinance or prepay the mortgage, depending on the contract signed. You will also need to look at any penalty costs due to prepayment and factor this in when deciding if refinancing would be cost-effective.

2. Evaluate various refinancing packages offered by your lender and prospective lenders. If your current mortgage is nearing maturity, some banks may allow you to lock in a second mortgage at the current rates while waiting to close until your current mortgage matures. This will help you avoid any prepayment penalties.

3. Consider trying to package a line of credit with your second mortgage. Many lenders will allow a cooperative to do this, and it allows them to have an emergency line available in the event of a financial hardship.

4. Choose your refinancing package based on the overall cost, not just the annual percentage rate (APR). APR's can be misleading because there might be hidden fees and penalties associated with the loan. Avoid signing a deal with a prepayment penalty clause, if possible.

Tips & Warnings

• Only sign a contract which may allow you to refinance in the future. This will give you the financial freedom to cash in on a favorable financial climate.

References

• CoopFCU.org

Resources

• Read this Article in Spanish