HELOCs for Co-ops: How They Work and Your Best Options

Getting a HELOC as a co-op owner may seem challenging, but it’s entirely possible with the right approach. By borrowing against the value of your co-op shares, you can access flexible funding for renovations, debt consolidation, or unexpected expenses.

In this article, we’ll show you how HELOCs for co-ops work, highlight the top lenders, and guide you through the steps to qualify. You’ll also learn about the pros, cons, and alternatives to help you make an informed decision about tapping into your co-op’s equity.

Lender	Rates	Best for
TD Bank	Starting at 7.74%	Availability
Citibank	Starting at 9.75%*	Current Citi customers
National Cooperative Bank	Not disclosed	New York and D.C. residents

Top choices for HELOCs for co-ops

As homeowners search for the best financing options for their co-op dwellings, a few key companies are standing out with strong offerings. These firms have tailored their home equity line of credit (HELOC) products to address the unique needs of co-op owners. Here’s a closer look.

TD Bank

Best for Availability

View Rates

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Why we picked it

TD Bank is our first pick for a HELOC for co-ops because it’s available in more states than other lenders on our list. Plus, you can access funds as needed, up to your approved credit limit, with no requirement to withdraw a minimum amount. 

TD Bank’s starting rate of 8.59% is competitive. If you have a TD personal checking account, you’ll get a 0.25% rate discount—a benefit that can translate to substantial savings over the life of your loan.

However, TD Bank’s website states that additional terms and conditions will apply to HELOCs for co-op owners compared to traditional homeowners. Review the fine print and discuss any specific requirements or limitations with a loan officer to ensure a smooth process.

• No minimum draw required
• 0.25% rate discount for TD personal checking customers
• Option to lock in a fixed rate on all or a portion of your line

Citibank

Best for Current Citi Customers

View Rates

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Why we picked it

If you’re already a Citibank customer, its HELOC could be an excellent option for financing your co-op needs. With Citi’s Relationship Pricing program, you can take advantage of a discounted interest rate based on your eligible account balances with the bank. 

Also, you can qualify for an interest-only draw period if you meet certain asset requirements. To qualify, you’ll need at least $200,000 in personal assets with Citi or $1 million in total personal assets across all your accounts. Even if you don’t meet the asset threshold for interest-only payments, Citi’s HELOC still offers a competitive 10-year draw period followed by a 20-year repayment term. 

Citi’s HELOC is currently available for co-op properties in New York, Illinois, Washington D.C., New Jersey, and Maryland. If you’re a loyal Citi customer residing in one of these states, its HELOC could be a valuable tool for tapping into your home’s equity.

• Special rate discounts for current Citi customers
• Option for interest-only payments during the 10-year draw period
• Available for co-ops in New York, Illinois, Washington, D.C., New Jersey, and Maryland

National Cooperative Bank

Best for New York and D.C. Residents

View Rates

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Why we picked it

As a cooperative bank, NCB specializes in lending to co-op owners in New York or Washington, D.C. Its HELOCs have interest-only draw periods of up to 10 years, followed by a 20-year repayment period. 

While information about specific borrowing requirements and HELOC details is limited online, NCB promises competitive rates, low monthly payments, and convenient draws. However, its HELOC is only available for co-op units in New York and D.C. and residential properties in Ohio. 

Because the information is so limited online, we recommend speaking with one of NCB’s mortgage specialists to understand the full terms and conditions before you apply. They can guide you through the process, explain any specific requirements or limitations for co-op owners, and help you determine whether NCB’s HELOC for co-ops is suitable.

• May have lower rates
• Flexible draws and repayment terms
• Specializes in co-op lending in New York and Washington, D.C.

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Best Home Equity Line of Credit (HELOC) Rates & Lenders

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How does a HELOC for co-ops work?

A HELOC for co-ops is similar to a traditional HELOC, but there are a few key differences because of the unique ownership structure of cooperative housing. Here’s what you need to know:

• Access to funds: A HELOC lets co-op owners borrow against the value of their co-op shares instead of the property itself.
• Ownership difference: Co-op owners don’t own the property outright. Instead, they own shares in a corporation that owns the building, along with a proprietary lease that allows them to occupy a specific unit.
• Equity consideration: Lenders look at the equity in your co-op shares, which depends on market value or share appreciation.
• Borrowing limit: Your borrowing capacity is determined by the lender’s combined loan-to-value (CLTV) ratio, which considers your current mortgage balance and the value of your co-op shares.

Example of a HELOC for co-ops 

Let’s say your co-op shares are valued at $500,000, and you owe $200,000 on your current mortgage. If your lender offers a CLTV ratio of 80%, here’s what that could mean:

1. Maximum loan value:
   $500,000 (share value) x 80% (CLTV) = $400,000
2. Subtract your mortgage:
   $400,000 – $200,000 (mortgage balance) = $200,000 available via HELOC

Of course, the exact amount you can borrow will depend on your credit score, income, debt, and the lender’s specific policies. Always check with your lender to understand their terms and conditions.

How to apply for a HELOC for co-ops

Applying for a co-op HELOC is similar to applying for a regular HELOC, but there are a few extra steps. You’ll need to work with your co-op board to get its approval and ensure compliance with its rules. 

Follow these steps to get a co-op HELOC. 

1. Review your co-op’s bylaws and rules regarding HELOCs

You may need permission from the board to proceed with an application. 

2. Research lenders

Once you have the green light from your co-op board, you can start researching lenders. Remember, not all lenders offer HELOCs for co-ops, so the research process can be frustrating at times. We’ve done the research by providing the best three co-op HELOCs above. 

3. Gather documents

After you’ve found a lender, you’ll want to gather your documents. For a co-op HELOC, you may need: 

• Your proprietary lease and stock certificate proving your ownership in the co-op
• Your personal financial documents (income proof, tax returns, bank statements)
• Your co-op’s financial documents (e.g., bylaws, insurance policy, annual budget)

4. Submit your application 

This includes filling out the application (usually online), providing the required personal and co-op-related documents, and paying any application fees.

5. Present the lender’s term sheet to your co-op board for final approval

If you’re approved, the lender will provide you with a term sheet outlining the HELOC’s conditions. You can present it to the board for approval.

6. Close on the HELOC

After the board approves, the last step is to schedule a closing with the lender. Sign the necessary documents and pay any closing costs. The lender will record the HELOC with the appropriate government offices.

Pros and cons of HELOCs for co-ops

You’ll want to weigh these pros and cons if you’re considering a HELOC for a co-op. 

Pros

• Access to funds for renovations or emergencies

  A HELOC can provide funds for upgrading your co-op or covering unexpected expenses without selling your shares.

• Lower interest rates compared to other loans

  HELOCs often have lower interest rates than unsecured loans, such as credit cards and personal loans. So if you qualify, they can be a less expensive way to borrow money.

• Potential tax deductions

  Interest paid on a HELOC may be tax-deductible if the funds are used for co-op improvements. (Consult a tax professional.)

Cons

• Potential co-op restrictions

  Some co-ops may have rules limiting or prohibiting HELOCs, which can make it difficult or impossible to secure this type of financing. Check with your co-op board to see whether it allows HELOCs.

• Limited lender options

  Even if your co-op board allows HELOCs, many banks will not lend to cooperatives, making it even harder to find a loan.

• Stricter underwriting requirements

  Lenders that offer co-op HELOCs may have extra terms and conditions, such as stricter underwriting requirements or more fees.

• Lengthy approval process

  Getting a HELOC for a co-op can take longer than for a traditional home because you’ll need the co-op board’s approval, along with additional documentation.

Before you decide to take out a HELOC, identify the purpose as a need or want to determine how flexible the funding goal needs to be. If it can wait, you may want to fund the project by saving cash reserves. If it’s a need, and the project needs funding immediately, you’ll need to find out whether your co-op allows HELOCs and, if so, which lenders are your best options and what restrictions and terms to compare.

Erin Kinkade, CFP®

Alternatives to a HELOC for co-ops

HELOCs can be an ideal solution for co-op owners. Still, several alternative financial products are worth considering. It’s critical to examine how they compare to your primary option.

Home equity loan

A home equity loan offers a lump-sum payment, unlike a HELOC, which extends a line of credit. It could be a worthwhile alternative for those who need a substantial sum upfront. However, the fixed payments and interest rates can be higher than a HELOC’s flexible repayment structure.

Cash-out refinance

A cash-out refinance allows for larger loan amounts compared to a HELOC, and you can use it for more significant renovations or debt consolidation. It could offer lower interest rates than a HELOC, but considerable closing costs may be associated.

Recap of HELOCs for co-ops

Lender	Rates	Best for
TD Bank	Starting at 7.74%	Availability
Citibank	Starting at 9.75%*	Current Citi customers
National Cooperative Bank	Not disclosed	New York and D.C. residents