All About HOA Standard Loans
HOA associations all require certain levels of maintenance and repairs over the years, and it may require seeking out HOA lending to get it done. There can also be other reasons like covering the cost of insurance premiums upfront to save money in the long run.
Whatever the need is, it is essential to understand how the loan process works to make an educated decision that is right for your community, so here is more.
Why Take Out an HOA Loan?
Your association may require a loan due to the property needing upgrades, or even in an emergency such as a natural disaster. Capital improvements can also be included in this because they can raise the property's overall value.
How Are They Beneficial?
Taking out a loan is helpful because the intention of the funding can be covered upfront to get the upgrades or repairs done more quickly. In addition to this, the payments can be spread out over time, which means a lower payment for the individuals living on the property.
What Does an HOA Loan Require?
The HOA will need to have the total amount requested in proper numbers prepared in association with the loan. This is to help avoid the payments being defaulted on and the bank trying to collect from the homeowners.
Items the Bank Will Need to Consider
There are some essential questions that will need to be addressed before applying, and they are:
- If the HOA management has experience with capital planning.
- How many defaults are there, and how much money is included.
- How many housing units are on-site and are occupied by owners?
- Will there be an increase in monthly assessments to help pay for the loan?
- If there is any liquidity available.
Are There Disadvantages?
The largest disadvantage of an HOA loan is that the homeowners may have to pay higher monthly fees to cover the costs.
What Kinds of HOA Loans Are Available?
There are two main options for loans that can be applied for: a line of credit and term loans.
Line of Credit
The line of credit is an option for associations that need to cover immediate expenses, and there will be a monthly payment based on a loan. There's also another option that works similar to a line of credit, and once the upgrades or repairs are completed, it converts to a loan that can be paid off over time.
Term loans work well because they allow you to be flexible in the time you need to pay them off. This loan also allows you to set your payments to help keep your budget aligned more easily.
Looking for Streamlined HOA Loan Options?
It can be stressful to know where to look if you need funding now. You want to make sure you are working with a company with your best interest at heart and will help you from start to finish with the process. HOA Capital offers one-on-one consultation for all our clients and specializes in HOA loans that you can trust.
If you are ready to find out your options, contact us today if you would like to set up an appointment or give us a call at 952-836-9593.