In NYC Cooperative buildings (and others throughout the country as well) Shareholders are often looking to refinance their apartment either through a new mortgage or for secondary financing such as a Home Equity Line of Credit (HELOC) or a second mortgage.

When a Board is looking over their options for approving or not approving this financing for the Shareholder, they should be looking at more than the overall amount of the financing. They should also take a hard look at what that loan will do to the Loan-To-Value (LTV) ratio of the apartment. If the Co-op, for instance, has a maximum of 80% financing, if the new LTV exceeds that amount, they may want to reconsider the approval.

Another good idea when reviewing the applications of potential refinancing is to review the appraisals that the banks are completing during their due diligence to double check the LTV ratio. In addition, double-check and ensure that the Shareholder applying can not only justify the new LTV but also that they can afford the additional financing with their current financial status. By checking every foreseeable issue, whether it be the LTV ratio or the financial status of the shareholder, the Board will make the correct decision with all of the relevant information in hand.