How do reverse mortgages work for co-op shareholders?

By James Woods
Managing Partner

Taking out a reverse mortgage could be helpful to senior citizens on a fixed income, but it’s important to be aware of some potential downsides, our experts say.

Reverse mortgages will become available to co-op shareholders for the first time—specifically, to shareholders who are 62 or older and use their co-op apartment as their primary residence. (They were recently approved by the New York State legislature and take effect in May.)

Those who qualify should make sure they understand the potential pros and cons of using this product. A reverse mortgage is a type of home loan in which the bank pays the owner a monthly stipend based on the home’s value and the owner continues to live in their apartment.

This can be very helpful to owners on a fixed income, but they should be aware that taking out a reverse mortgage adds onto their existing mortgage and decreases the equity they own in their home. 

“Reverse mortgages are unique,” says Andreas E. Christou, an attorney with Woods Lonergan. “They typically involve receiving an up-front payment, a stream of payments, and/or satisfaction of your debts, such as an existing mortgage. And in exchange, the bank will take the property, or in the case of a co-op, the shares, and lease, upon the death of the shareholder, rather than requiring repayment.” 

About the Author

James Woods, Managing Partner of Woods Lonergan, holds more than 25 years of experience in corporate, real estate, and business legal matters. His expertise in handling negotiations, litigation, jury trials, and all forms of alternative dispute resolution spans multiple areas, including corporate, real estate, and commercial litigation. James actively represents dozens of Cooperative and Condominium Boards and serves as counsel to many Corporate Boards. Prior to founding the firm, James proudly served as an Assistant District Attorney for Nassau County and handled both jury and bench trials. With experience that also covers sophisticated transactions and complex acquisitions, James also serves as counsel to several domestic companies in a range of industries and commercial arenas, including real estate, insurance, banking, transportation, and construction. If you have any questions about this article you can contact attorney James Woods through his biography page.