Co-op Handbook
Mortgage Loan Refinancing
One of the main reasons homeowners refinance their mortgages is to take advantage of lower interest rates. If rates have lowered since the time of the original mortgage loan you obtained to purchase your shares in the co-op (known as a “share loan”) you might refinance your mortgage at a better rate and therefore reduce your monthly payments.
A general rule of thumb states that if rates drop by two percentage points, then it’s worth it to refinance. However, it might be worth it to refinance with only a one-percent drop in interest rates if you find a good deal on refinancing costs. A new lender may be willing to negotiate a reduction of points or a waiver of the title search, application, credit check or other fees.
To determine whether it’s worth it for you to refinance your share loan, you should do a break-even analysis. This analysis will help you figure out how many months it will take before you break even, after taking into consideration all the up-front refinancing costs, any prepayment penalty on your current loan, and the savings in interest payments. You can do this analysis online yourself by using the “Mortgage Refinance Savings Analysis” calculator available on our accountants’ Web site. Or ask your financial advisor to help you.
Some lenders offer a zero point/zero fee loan, which means that you do not have to pay most of the fees generally required; however, your monthly payments may be somewhat higher (lenders generally will charge a higher interest rate for this type of loan). The zero point/zero fee loan eliminates the need to do a “break-even analysis” since there is no up-front expense that needs to be recovered.
If you do decide to refinance, you should understand that you will not only have to fill out the paperwork required by your financial institution and meet their requirements, you will also have to fill out paperwork and gather materials for the co-op. The co-op must protect its interests and agree to the refinancing as well.
You must therefore contact our managing agent (see Managing Agent) as soon as you start thinking about refinancing, and you will be sent guidelines listing the requirements. Among these are: maximum financing allowed, copy of loan commitment letter, proof of current debt service, proof of current income, financial statement, credit release authorization, all obligations to the co-op must be current.
Reader Comments
Posted by Eduardo Gómez, 11 Oct 2002 at 1:59 PM: 
Instead of doing a full refinance, you might want to ask your loan officer whether you can modify the interest rate on your current mortgage loan to conform to today’s lower rates. I was planning to refinance my 3-3 ARM mortgage loan because a higher rate of 7.25% had kicked in last year before the interest rates started to fall. Today, the same loan is at 4.375%.
So I called the mortgage department in my credit union to ask about refinancing. The loan officer looked up my information, and suggested that it might be much cheaper to simply ask for a modification in the interest rate, rather than refinance. Cost? 1% of the balance of the loan (in my case, just $185), as opposed to about $2,000 in new closing costs for a refinance.
So, I’ll pay $185 to lower my interest rate from 7.25% to 4.375%, which will cut my monthly payments to less than half of what I’m currently paying, and save a ton in interest over the remaining life of the loan — quite a deal!
Posted by FIORE VACCHIO, 15 Mar 2003 at 7:48 PM: HOW DO YOU FIND SOMEONE THAT REFINANCES YOUR CO-OP?
Posted by Webmaster, 15 Mar 2003 at 9:54 PM: I’m not sure I understand your question, but if you’re interested in finding a bank that will refinance your current mortgage, you can use, for example, the following Web site: http://www.bankrate.com/brm/rate/refi_home.asp. There you can find the best rates by selecting your state, the kind of mortgage you want, etc. Hope this helps.
Posted by Patricia James, 12 Sep 2003 at 1:26 PM: 
Hi,
Does anyone know of a bank that refinances co-op’s with cash a cash out on a INVESTMENT property. I recently married and moved into my husbands place and now sublet my property. I can’t find anyone. Please help?
Thanks,
Patty
Posted by Patricia James, 12 Sep 2003 at 1:27 PM:
Hi,
Does anyone know of a bank that refinances co-op’s with cash a cash out on a INVESTMENT property. I recently married and moved into my husbands place and now sublet my property. I can’t find anyone. Please help?
Thanks,
Patty
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