How do co-ops work?


I understand how buying a condo or a house works, but not a co-op? What does it mean that you are buying shares of the company instead? what happens at the end of your mortgage term?

In: Other

In a condo you own a deed to the your actual apartment and then have to work with the condo board to pay for all of the common areas and upkeep. But, you can sell the deed to the unit you own to anyone you want.

In a co-op you don’t own your unit. You own part of the company that owns the entire building. The mortgage that you take out pays for your share of that company. Once your mortgage is paid off you continue to own your share of the company. One big difference is that the co-op board can choose who you are allowed to sell your share of the company to. So, they get to interview any potential new neighbors and approve or reject them.

A coop is a corporation that owns assets (usually the building and the land underneath, or sometimes just the building). By buying shares in the corporation, you become entitled to use a portion of those assets, that usually corresponds to a unit in a building (but can be other things too). You mortgage those shares in return for money (to pay for them) and pay the loan to the bank. Once you pay off the loan, you own the shares outright.