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Co-operatives can be less expensive overall than a townhome or condo, but you’ll need some serious cash in hand to make it happen.

Co-Op Basics

Co-op stands for “housing cooperative,” which can be described as follows:

  • The co-op consists of a building with multiple units and common areas
  • The entire building, including the interior and exterior of all units and common areas, is owned by a corporation
  • The corporation is made up of owners within the co-op, who have bought shares that entitle them to live in the building

Buying In 

A traditional real estate transaction allows you to purchase property. With a co-op, you buy shares in the corporation that owns it. It’s like buying shares in a business, except the business is the co-op. Once you have bought your shares, your main expenses are associated with maintenance, taxes, and amenities, split among members of the co-op and paid as a monthly fee. Since you’re buying shares, not a property, you can’t use a traditional mortgage. 

The co-op association 

The association manages membership fees and has a board of elected members who approve new potential shareholders and whether or not they can join. Every member of the co-op is eligible to vote on rules and management of the building, and you can also run to sit on the board. To get into a co-op, you usually have to pay cash, as mortgages don’t apply and loans to buy into a co-op are rare (although not unheard of.)

Co-Op Alternatives 

If you aren’t liquid enough to buy shares in a co-op, consider a condo instead. You can get a mortgage to pay for your co-op, and with some hunting, you may be able to find one that affords the communal feel of a co-op as well. You can also look into a townhouse/townhome. These have several different options when it comes to a mortgage.

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Rates & Money is your go-to destination for free information about mortgages. Our home buyer guides and home loan articles are designed to help you make informed decisions when buying a home


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