For many, the idea of getting a new mortgage on a home or apartment is enough to cause even the heartiest soul to break out in a light sweat. Now imagine refinancing a mortgage for a multimillion-dollar co-op building, and the light sweat may turn cold.
Despite the intimidation factor, with the right mix of expert advice and sensible planning, refinancing an underlying mortgage for even a large co-op community can be undertaken with a minimum of stress and angst.
An underlying mortgage is “A commercial loan on a piece of real estate, owned by a corporation,” says Pat Niland, president of First Funding of New York LLC, a commercial mortgage firm. In a co-op building with one hundred units, the underlying mortgage will be the only one on the building itself. “That loan is senior to all other types of liens,” says Gregg Winter, president of the Manhattan-based Winter & Company, specializing in real estate loan financing. And, he adds, “It is a form of debt that is proportionately shared (by residents) according to the number of shares in the whole building.”
This is completely different from what takes place in a condo community, where every unit owner would have their own individual mortgage. In fact, overarching loans for an entire condo association or community are exceptionally rare. While Winter says he has done literally hundreds of underlying mortgages for co-ops over the course of his career, he has helped secure loans for less than five condo associations in that whole span of time.
Refinancing a mortgage is a serious and time-consuming process, one that for most New York buildings requires making decisions about millions—and sometimes tens of millions—of dollars. Co-op boards and management will undertake securing a new mortgage for any number of reasons. One might be that their previous loan is coming due. “That is one of the top reasons for refinancing,” says Niland.