How Condos & Co-ops Differ

Though both types of properties are well known, people often confuse one for the other. The main difference is that when you buy a condominium, you are indeed purchasing real estate property—much like if you had purchased a single-family home. But when you buy a co-op, you are in fact purchasing shares in a corporation that actually owns the physical property, receiving a proprietary lease for your unit.

Since these are different types of purchases, condos and co-ops require different financing structures.

Co-op buildings typically have a mortgage against the entire property, which is known as the underlying permanent mortgage. Under this arrangement, the monthly mortgage payments are shared by unit co-operators via monthly maintenance charges. In condominiums, each unit exists as a separate property, but common features like lobbies and hallways are owned jointly.

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Financing for Co-ops

Co-ops are different from condos and single-family homes. As stated earlier, purchasing a co-op is actually akin to buying shares in a corporation. But to buy into a co-op you also need to be approved by the co-op board. This vetting and approval process is often extensive, and includes interviews and character references in addition to credit, employment, and financial history. 

When securing a mortgage for a single-family home or a condo, you sign a deed to the lender. But individual co-op units don’t have deeds, instead, there’s one deed for the entire building. So in fact, a co-op mortgage loan is a “share loan.” 

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