What Is an HOA Line of Credit (LOC)?
One of the most significant issues that HOA associations have to hurdle is having funding in place to create a solution for problems that arise when there's not enough income from assessments and fees. There may be a need to find another funding source for capital improvement projects, and an HOA line of credit can be a way to fund this. In this article, we will discuss what an HOA line of credit is to help give you a better idea if it is the right fit for your situation.
Why Get an HOA Loan?
Loans can help create funding for planned or unexpected projects that may come up on your property. If damage has occurred from a storm, or you want to build an HOA Clubhouse for residents and guests, and you don't have the funding, a loan can help achieve these things.
How Can an HOA Loan Be Beneficial?
One way getting a line of credit is helpful is to maximize the number of profits coming into the association due to maintenance or repairs being paid upfront and not depleting the reserves. This is also helpful because, with the funding in place, the project is completed quickly, and the tenants' payments are spread out over time. The only issue that might arise with this scenario is the loan type and the interest rate involved; it may raise the HOA fees.
What Does an HOA Loan Require?
One of the main things that will be required is an accurate understanding of how much money is needed by having the correct numbers in place to show the lender. It is recommended to always overestimate how much you believe in case you need to help fund any unexpected issues that can arise.
How Is an HOA Loan Structured?
In most cases, the structure will involve the banks asking the association to have funds put aside to repay the loan. The association will also need to let the community members understand what expenses are associated with the project. The typical loan is around 15 years, and the association will pay interest and the principal amount.
What Information Do Banks Need to Grant an HOA Loan?
Make sure you have these critical pieces of information available for the lender:
- Are there any defaults already in place, and how much are they?
- How many housing units are in the association?
- How many units are owner-occupied?
- Will there be an increase in monthly assessments?
Keeping Your HOA Association Needs at the Heart of the Matter
If you need funding for a project for your association or are looking to improve the value of your property HOA Capital is the expert you need. We want your community to be in the best condition possible because we understand it keeps your occupants happy and your property value high.
We offer HOA management and HOA loan assistance and take the time to answer all your questions to find the right solution for your association.
Our team is passionate about communication and helping all our clients create the association of their dreams in Minnesota, so message us online or call us at 952-836-9593 today.