Hi,

I am a co-op Board president and a finance manager with a multi-billion dollar corporate pension fund. Co-ops and pension funds are similar in that long-term financial planning is absolutely necessary.

I cannot think of a single situation where I would recommend an interest only mortgage, ever. I would recommend either a 10 year mortgage with a 30 year amortization or a 30 year amortizing mortgage.

Assuming that a co-op is not a new building, the mortgage is probably funding capital repairs and improvements. Things wear out and will continue to do so. Having a break in the mortgage every 10 years or so gives the then Board the ability to fund necessary capital repairs if funds do not already exist (of course the preferred method is saving up ahead of time). The amortization recommendation allows the co-op to lower the debt to building value ratio. As we have seen, the assumption that building values will always go up is false; or rather the assumption that the value will always be higher when funds are needed is false. Lowering the principal on the mortgage shows the lender two things: the co-op is serious about sound fiscal management; and provides higher security (loan coverage) for the loan and thus the potential for a lower rate.

I would recommend a 30 year amortizing mortgage for a co-op with a continuing culture of strong fiscal management only where they would set-aside funds on a regular basis for capital repairs and improvements sufficient enough where tapping the mortgage would not be necessary.

Good fortune to you all!