Cooperative housing: the initial investment is compensated by paying less interest on the mortgage

When you are looking for a home the first question that arises is whether It is better to opt for a new construction or a second-hand one.. Both options have its pros and cons. For example, a new home usually has a higher price than a second-hand home with the same characteristics, but you will probably have to make some renovations to the latter to make it 100% to your liking.

Likewise, within each type of housing there are a multitude of options, such as cooperative housing. These types of homes, which would be within the category of new construction, differ from the rest because they are not developed by a development company, but by the cooperative itself. Furthermore, in this case, as the Mortgage Director of the iAhorro mortgage comparator and advisor, Simone Colombelli, explains, “the cooperative is made up of a group of people who agree on the need for housing and who come together to create a society that builds a property, and that later they will become the residents of those homes.”

Advantages of cooperative housing

As iAhorro also explains, “a housing cooperative is a Non-profit entity “which is in charge of the entire process of construction of the homes and it is the partners themselves (normally the buyers of the homes) who are jointly in charge of the process of purchasing land, designing and developing the promotion.” Of course, for a cooperative to succeed and be legally constituted, it must be registered in the Registry of Cooperatives of the autonomous community in which it is located and, normally, it has a Governing Council, which is the governing, management and representation body. of the cooperative society.

Therefore, one of its main advantages, says Colombelli, is that “the partners make decisions in a completely democratic way, so everyone has the same decision-making capacity within the promotion construction process.” Furthermore, although it may seem that this type of association carries more risks than if the management of the homes is carried out by a developer, the spokesperson for iAhorro assures that “in all off-plan construction there is risk, whether it is a cooperative or a developer.”

Precisely due to the absence of the figure of the promoter, the purchase price of cooperative homes is lower since, by eliminating intermediaries, a home is obtained at cost price. So much so that this type of property usually has a purchase price between 10% and 20% lower. For example, a new cooperative home worth 300,000 euros, if managed by a developer, its price could easily rise to 330,000 or 360,000 euros. Likewise, we could consider as one of its advantages that, by having a lower price, the buyer will also ask for a mortgage smaller to the bank.

Disadvantages of cooperative housing

Among the inconveniences that citizens encounter when accessing cooperative housing is the great initial financial effort What do they have to do to be able to buy them. And in order to qualify for this type of housing you have to make several payments prior to applying for the mortgage, that is, with money saved:

  • The social capital of the cooperative. It is the initial fee that is paid to establish the cooperative. Normally it is between 1,500 euros and 6,000 euros, that is, between 0.50% and 2% of the cost of the home. Of course, this payment It is returned to members when the cooperative is dissolved.

  • The payment for joining the cooperative. Single payment that is made upon signing the contract and that involves between 10% and 30% of the purchase value.

  • Periodic payments from the beginning to the end of the work. They tend to be between 12 and 18 payments, although they could increase if the work takes longer and the buyer decides to continue paying to later lower their mortgage. They represent between 5% and 20% of the value of the home, to which VAT should also be added.

So, to qualify for cooperative housing you must contribute around 30% of the price of the home. Of course, Colombelli clarifies, “depending on the cooperative and, above all, the price of the land where the homes are going to be built, that percentage could be higher or lower. For example, in the Community of Madrid it could easily reach 40 or 50% of the total, but in other autonomies such as Andalusia or Murcia it would be closer to 20%.

In addition to this initial contribution, when requesting the mortgage, the buyer will also have to pay the purchase and sale expenses and mortgage formalization. Among them is a 10% Value Added Tax (VAT), between 0.5% and 1.5% to pay the Tax on Recommended Legal Acts (IAJD), about 350 euros to face the appraisal of the housing, about 500 euros for the notary and about 1,000 euros to register the home in the Property Registry.

Developer housing vs. Cooperative housing: what is better?

If we do the calculations of how much the buyer would have to pay in case of purchasing a cooperative home or a developer home, we see that the money that must be saved is a little higher in the case of cooperatives, but after the interest payment during the mortgage is considerably reduced.

If we take the previously mentioned prices as a reference (300,000 euros for a cooperative home and 360,000 euros for a developer home) we see that, for a cooperative home, the buyer must initially pay an average of 1.5% for the share capital. (4,500 euros), 20% of incorporation into the cooperative (60,000 euros), 10% of periodic payments (30,000 euros) and just over 10% to pay the costs of sale and formalization of the mortgage (34,850 euros) . This represents a total outlay of 129,350 euros.

On the contrary, to purchase a new home from a developer, you must first pay 6,000 euros, which are usually given as a reserve (it could be more depending on each development); 20% of the purchase price that is contributed before requesting the mortgage, either in monthly installments or in a fixed installment (72,000 euros); and the payment of the purchase and sale expenses and management of the mortgage (about 41,450 euros). Thus, in this case, the buyer must have saved 119,450 euros, about 9,900 euros less than if they bought a new cooperative home.

Savings of up to 40,000 euros in mortgage interest

Once these calculations have been made we see that, to buy a cooperative home The mortgaged person would pay 90,000 euros upfront and the mortgage would remain at 210,000 euros.. And for a developer’s home the down payment would go down to 72,000 euros, so the mortgage would rise to 282,000 euros. Therefore, if we calculate, in each case, the interest that the buyer would pay if he signed a 30-year fixed mortgage with an interest rate of 3.03% TIN (average obtained by iAhorro users this type of mortgages in December 2023) we see that for the developer’s home you would pay 1,193.49 euros in installments every month that the loan lasts and for the cooperative home only 888.77 euros.

This means that, over the 30 years of the mortgage, the interest to be paid for a cooperative home would be around 109,957.14 euros and for a developer home it would be 147,656.73 euros. In this way we see that, whoever buys a cooperative home instead of a developer home would save a total of 37,699.59 euros in interest payments despite having to pay 8% more savings (9,900 euros in this case ) in the initial contribution to access the home.

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