Home-equity Loans Are Available to Co-op Shareholders

The owner of a $450,000 co-op in Brooklyn wants to take some equity out of the apartment. But reverse mortgages are not allowed in co-ops, the shareholder doesn’t want to take out a mortgage, and, because of advanced age, fears he might not qualify for a home equity line of credit, or HELOC. What are this shareholder’s options?

Age should not be a barrier to taking out a HELOC, replies the Ask Real Estate column in the New York Times. But co-ops, like banks, set rules about how much shareholders can borrow, often tying that number to the value of the apartment and the shareholder’s debt-to-income ratio. Most co-ops do allow cash-out refinances and HELOCs.

“Most managing agents will assist the shareholder with the process and provide guidance,” says attorney Mark A. Hakim of Schwartz Sladkus Reich Greenberg Atlas. Even if you do not talk to the managing agent ahead of time, you will need to inform the board of any new loan or risk of defaulting on your proprietary lease.

Unlike a condo, a co-op is not real property. Instead, shareholders own shares in a corporation. “Because of those complications and because co-ops are so unique to the New York marketplace, banks don’t allow reverse mortgages,” says Zack Tolmie, a home-lending officer at Citibank. “You could be 120 years old or 20 years old and still take out a 30-year mortgage.” He adds that the bank just wants to verify the borrower’s ability to pay back the loan, so it will want to see evidence that the borrower has the resources to do so. Money matters; age, not so much.