HOA Capital & Loan Assistance


Tips to Find the Best HOA Loan for Your Community
HOA Capital

Tips to Find the Best HOA Loan for Your Community

The fact is that your HOA board has multiple responsibilities, from choosing property managers that will get the job done right to organizing contracts for ongoing upkeep. You might have a project scheduled for future upgrades and need to decide on the best way to create financing for it.

Loans can be an excellent alternative to spending the HOA reserve fund you have, so how do you find the right loan for your community? Once you have confirmed you have the authority to gain a loan, here are helpful tips to follow.

Understand the Needs Your Community Has

When taking a loan, there needs to be a clear understanding of the projects to be implemented. You will also need to have a budget in place to reflect the fiscal adjustments made in coordination with taking the loan. This will prevent overspending, avoid increasing dues for the tenants, and reduce the need to make future loans.

Know Your Options

You want to find a bank that will work alongside you in the process to help you understand what risks are involved in the loan. The best bank for your needs will help ensure that you have all the correct information to help educate homeowners on taking out the loan. It also helps make sure you have an appropriate loan structure, everything from amortization, covenants, rate/term, prepayment penalties, etc.

Compare Lenders

You may want to have designated individuals in place to decide where the funding will be best used while at the same time shopping the lenders for competitive HOA loan rates. This allows the documentation to be in place for any board members who may come on in the future.

You also need to understand the kind of loan that is the right fit for your situation. There are three standard HOA lending options:

Line of Credit

This option works like a credit card where the association has a maximum limit. The interest rate can be variable, but the money can be prepaid with no penalty. Also, you typically only pay interest on what is outstanding versus having a fixed payment each month which gives the HOA some flexibility.

Term Loans

This choice provides the requested funds to the association on a 3 to 20-year loan and has a locked interest rate.

Credit Line with Conversion

This funding option is ideal when a renovation is needed, and the loan is converted to a longer-terms once it is complete. This allows a longer time to pay off the loan and provides immediate funding.

HOA Capital Can Help You Find the Right Loan Option

HOA Capital offers streamlined loan options and one-on-one consultation for the process. We want to help you create an optimal living environment for all your tenants and secure funding for any needed capital improvements.

We strive to create a plan that outlines the needs of our clients as they are going through the loan process, so give us a call at 952-836-9593 or contact us today for more information!

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