Combining Apartments and a Mortgage

coop or condo?

You can get one mortgage loan that is collateralized by two (or more) properties, assuming you're buying them both at the same time. They would be cross-collateralized, so one could not be released w/o the entire loan being paid off, unless you had release provisions built in.

My experience (buying from sponsor so it may be different if there are two distinct sellers) is you need finance it as if it were already one unit. If it is defined as two units then one will be considered an "investment property" with negative mortgage and tax implications. In my case the two units were treated as one throughout the contract process and, with help from a mortgage broker my attorney recommended, financing was easy. (Of course this was 2005 so with more aggressive regulations it may be different). I did make an agreement with the board to legalize the combination before I sold the apartment, which ended up costing me about $10K all in. You will probably have the work done to legally combine when you do the renovations, hence little to no incremental cost.

Mortgage Broker here. I can check with my lenders. But would need more info, i.e. How much are the units worth? How much financing do you need?, etc.

Ellen Silverman
E.S. Funding Co. NMLS#60631
esfundingco@aol.com
www.esfunding.instantlender.com

I looked into this recently. My bank (Citi) told me that it was fine, but (a) they would need to appraise the apts both separately and as if combined and would lend based on the lower of the two appraisal methods and (b) I would need to sign something staying that I intended to combine. I know someone who combined two apts and had to agree with his lender that the combination would be completed within X months and the lender came back to check. Non of this seems like much of an issue. If by chamce the lender came to check and one was still in the middle of the renovation, I can't imagine the lender would default the loan (unless maybe if the renovation was taking way too long).

Nativerestless. Who was your mortgage broker and which bank provided the mortgage? I wonder which bank is providing this type of mortgages in the new world. I need almost $2mm mortgage for combination apartment in a coop.

My experience was way back in the old world. I don't remember the mortgage brokers name but the initial mortgage was written by a group named Odyssey and immediately sold to Citibank. Plus the among was very much less, under $300k I believe.

Work with First Republic. or someone like that. They have more flexibility to deal with situations like this because they don't have to sell the loans to investors. You can do this also with the Chase/Wells/Citis, but there is a lot more hassle involved with them in something like this from my experience.

The most recent deal I sold was 2 units with different owners, bought by purchasers to combine. The bank did 3 apparaisals , each unit seperately, then what it would be worth when combined. They held back part of the mortgage until construction started, 1 wall was down and 1 kitchen removed. Not all banks are giving these types of loans. Wells Fargo did this one. I hope that helps