Every eight to ten years, most cooperative housing corporations in New York City refinance their underlying mortgages. That is because many co-ops, rather than taking 15/30 year self-amortizing mortgages which are paid in full at the expiration of the loan term, take out ten-year loans that are often interest-only or “balloon” mortgages where the entire amount borrowed is due and payable at the expiration of the 10-year term. The “balloon” payment must fully be paid at the end of the loan term, which is why co-ops frequently find themselves contemplating a mortgage refinance.
Adam Leitman Bailey, P.C. recently represented a luxury co-op on the Upper East Side of Manhattan in connection with the refinancing of their underlying mortgage. The co-op refinanced the prior underlying mortgage of $3,000,000 with an interest-only mortgage in the amount of $4,000,000 at an astonishing interest rate of only 3.666%. The co-op realized net proceeds of more than $835,000 as a result of the refinance which will be used to fund long-term capital projects that have been on the co-op’s “wish-list” for many years.
Attorneys at Adam Leitman Bailey, P.C. successfully overcame numerous obstacles, including a quick closing deadline, to ensure the co-op captured a low-interest rate and closed prior to the enactment of an impending new tax bill being negotiated by Congress.
Additionally, Adam Leitman Bailey, P.C. was able to reduce the co-op’s refinance costs by approximately $84,000 by taking advantage of a loan consolidation, modification, and extension which required the co-op to only pay mortgage recording tax on the difference between the old mortgage and new mortgage, or $1,000,00, rather than on the entire new mortgage of $4,000,000.
