Home Business & Finance Financing your condo, co-op, or townhouse
There are different types of condos, and some of the differences can affect the type of financing you obtain. There are:
• High-rise, mid-rise, and low-rise
• One- to two-unit condos
• Condominium conversions
High-Rise, Mid-Rise, and Low-Rise
These terms refer to how many stories, or floors, there are in the project. A low-rise is typically one to three stories high, a mid-rise is four to nine stories, and any condo more than nine stories is a high-rise. Typically, high- and medium-rise condominiums are found in downtown, urban areas.
Sometimes lenders will require a bigger downpayment for a high-rise condo than for a low- or mid-rise. Financing a high- rise could result in a higher interest rate or an additional lender fee as well.
One- to Two-Unit Condos
Sound a bit odd? Why would anyone have a one- or two-unit condo? Whaf s the point? In fact, this trend began when people figured out they could buy a stand-alone duplex (two attached houses) or a fourplex — four separate houses — all connected.
The idea caught on when turning a duplex into a two-unit condo made sense. The owner could buy the duplex, turn it into condos, and sell those condos separately instead of selling the duplex all at once. The same goes for a triplex or for a fourplex. A buyer acquires a multiunit structure, does all the legal work to turn it into condos, then sells them one by one, which often results in more profit for the seller. However, there is littie demand in today's real estate market for one- or two-unit condos compared to single-unit, owner-occupied real estate.
A conversion is typically an apartment building that has been turned into condominiums. Lenders may have special condo- conversion guidelines that the developer must meet. For example, making sure the condos have separate firewalls or stipulating that other recent conversions in the area must be 80 percent presold (which means that if there are 100 units, 80 of them must already have sales contracts on them).
You can't recognize a condominium conversion just by looking at it. Nor can you tell whether your lender will put any special conditions on it. But a little advance research will tell you.
One can probably guess what a condotel is: a condominium complex where individuals own the condos, but some or most are rented out by the day, week, or month, just like a hotel.
In this case, you can tell a condotel when you see it because it will have a check-in desk and hotel-like amenities. Few lenders make loans on condotels.
Condominiums have common areas such as sidewalks, swimming pools, recreation rooms, and health dubs. These common areas belong to the condo owners. No, you may not remove “your section” of the sidewalk and haul it upstairs. You may not claim a stake in your 1/100 of the pool and make the other swimmers keep out. Everyone owns the structure and amenities equally, as well as the land where the structures stand.
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