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Robert Mclister: Cooperative apartments can cost two thirds to half the costs of comparable condominiums, but their financing is not easy
Published on January 24, 2025 • Last updated 18 hours ago • 3 minutes of reading time
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The cooperative apartment Abby Road in Edmonton, Alta. Photo by John Lucas/Edmonton Journal files
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Imagine that you wake up in an apartment with a postcard view of Stanley Park in Vancouver or a wonderful gorge in Toronto, all with a fantastic passability of the neighborhood's amenities. Now imagine that the price is only a fraction of what you would pay for a typical condominium.
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That is what some buyers get with cooperative apartments. In fact, many people have to check their glasses again when they see the prices of cooperatives at MLS. Sometimes you can cost two thirds to half the costs of comparable condominiums, which makes many ask for what is wrong with the property.
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Before you start to imagine cooperatives as the unicorns in the real estate industry, there is a catch. On the one hand, your financing is not easy.
“We can't really pound these things,” says Ryan McKinley, who manages cooperative financing for vancity, one of the country's largest cooperative loans. “The company is owner of the property at a participation cooperative. It is all based on a single property title and the shares are output to the homeowner … We take the physical share of shares as security. “
This requires much more DUE diligence exams from the lenders and it is more difficult to withdraw the property if the borrower does not pay. Therefore, most banks pretend to juggle them with burning swords when they mention cooperative financing.
Credit cooperatives such as Vancity (BC), Duca (Ontario) and Desjardin (Quebec) are the most common sources for cooperative housing loans, but even they are difficult to find in most provinces. The credit options in Ontario and BC tend to be most extensive
If you want to buy five percent down payment as with a normal condominium, this will not happen. “Units within cooperatives are not entitled to a mortgage loan insurance for homeowners,” says the Canada Mortgage and Housing Corporation. So make a deposit between 20 and 35 percent.
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Many lenders limit the period of repayment to 25 years, although smaller credit cooperatives such as the Parama Credit Union and Northern Birch Credit Union based in Toronto provide for up to 30 years. By the way, because they are so difficult to find, here are a few more cooperative loans: GVC Credit Union (BC) and Luminus Financial (Ontario).
The good news is that interest rates for cooperative loans are usually about the same as for normal mortgages, at least among lenders who offer cooperative financing. At Vancity, for example, they speak of rates of only 4.39 percent for a three or four years of festival.
Other considerations
The decision to buy a condominium or a cooperative is like choosing between a shiny new sports car and a classic classic classic. You have to weigh the resale value against the original price. Since they are less liquid, the sale of most cooperative units takes longer, so it is best to have a long -term time horizon.
And the truth is that cooperatives have a lot of other peculiarities. Below:
- The buildings are usually quite old – many date from the 50s and 60s – therefore they have to carefully examine the maintenance, structure, building envelope and reserves. Lendingers have their own lists with cooperative buildings for which they award loans, as well as black lists with cooperative buildings, near which they do not move.
- In most cooperatives, rental and/or pet restrictions apply.
- The average age in cooperatives tends to be higher than in condominiums (no disadvantage unless you have something against older people).
- Some require you to give existing residents a right of first refusal when selling.
- Many accommodations do not have their own washing machines and dryers, so they may have to talk to their neighbors about jointly used laundry options.
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In many world cities, cooperative apartments are as common as pigeons. It is estimated that three quarters of the apartments in New York City are cooperatives. However, they never really prevailed in Canada.
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However, if you are willing to plant roots, lay the location over the novelty and a high down payment does not make you squeamish, cooperatives could be their golden ticket. They exercise a special attraction on a smaller and pensioner who have paid off their houses and dream of a life without the tyranny of lawnmowers and homestalling.
Robert Mclister is a mortgage strategist, interest analyst and editor of Mortgagelogic.news. You can follow him on X under @robmclister.
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