LONG TERM VS. SHORT-TERM, P.2

The fourth reason is experience. Every year, I work with several boards who desperately need funding for emergency repairs or capital improvements but are stymied by the terms of their existing long-term underlying mortgage. In many cases, their only option is an onerous prepayment penalty and an expensive premature refinancing, most of which could have been avoided had an earlier board made better financing decisions.

So what would I recommend for your building? Actually, something very close to what your board president described. Ten-year loans are, by far, the most common form of underlying mortgage for New York area co-op buildings. They are readily available from a wide range of lenders, so the pricing is competitive. For example, interest rates on new 10-year loans run from the mid-five percent range for amounts under $500,000 to the low-four percent range for loans over $5 million.

It appears that your board may have made a wise decision, hopefully and presumably in consultation with your cooperative's professional advisors.

Patrick B. Niland, a mortgage broker, is the principal of First Funding of New York.

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