Refinancing a slightly overweight co-op loan

Q: I want to refinance the mortgage on my co-op apartment because the rates are so low, but the amount I owe is higher than the cutoff for a conforming loan and I can’t pay down the difference right now.

Does it make sense to take out a home equity loan for the difference if I can pay it off within a couple of years?

Would my co-op board have a problem approving it?

A. If you can find a bank that is still making home equity loans on co-ops, then your idea may indeed be the smartest option, says mortgage broker Kira Silverman.

Be aware that with a few exceptions, like TD Bank, many lenders have stopped making home equity loans on co-ops.

“When the secondary market for mortgages dried up, home equity lenders scaled back enormously,” she says.

Rates have come down a lot lately—even on conforming jumbo (up to $729,750) amounts--so run the numbers both ways to see what makes sense in your situation.

As for getting your co-op board’s approval, property manager Michael Wolfe says home equity loans are frequently approved in the buildings he manages.

What’s important isn’t the home equity piece but whether the amount of debt or your monthly payment will go up, and whether your income can support it, says Wolfe.

“Your co-op has a maximum amount of financing that any shareholder is permitted to place against their unit,” explains real estate lawyer Robert Braverman.  “The total loan amount of both the conforming and the equity loan would have to stay within the co-op’s requirements.”

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