Financing a Condo vs. a Co-Op

Why is financing a condo easier than a co-op?

Co-ops and Condos may seem similar, but legally they’re much different.  And unlike co-ops, financing a condo does not generally cause the lender to have many concerns.

Both types of dwellings are typically suites in multi-unit buildings.  And to look at them with the naked eye, you would not likely be able to see any visible differences.  The one major difference however, is that one can be easily financed and the other is almost impossible to finance.

But why is it harder to finance a co-op than to finance a condo?

• In a condo or a strata-titled property, the legal title to the unit is registered in the name of the owner.This makes it easy for a lender to take as security for a mortgage.
• In a Co-op, the title of the building is held in the name of the Co-op. The owner only owns an interest in the Co-op and a right to use their suite.
• Unlike when financing a condo, the owner’s name does not show up on the legal title of the unit for a co-op.
• Lenders tend to avoid Co-ops as it is much more difficult for them to take effective security in the unit.

However, there is a reason that Co-op units are marketed at prices that seem low for a neighbourhood. This is because the purchasers usually have to pay the full purchase price in cash.

If you aren’t sure about the title that your client has, it’s a good idea to contact a lawyer for advice.

If it’s something that can be financed, the underwriting team at Kokanee Mortgage is always ready to help.  No matter the situation, we are at the ready to be able to deliver quick responses to your most pressing lending concerns.