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HOA Loans for Financing Projects

Residents of a condo association building faced a quandary. Ignored, old and failing pipes in the building could burst at any moment and cause severe water damage. The fix, however, came with a hefty $1 million price the condo association didn't have.

And because the condo association had no real collateral, its condo board members wondered who would loan them the funds to make the overdo repairs.

Contractors are now repairing the plumbing. In the meantime, the HOA loan is allowing the individual condo owners to pay for the repairs over a 10-year span instead of having to come up with a large HOA assessment.

The HOA loan or condo association loan allowed the group to do all the repairs at once, rather than do it themselves or spread the work out over time. HOA loans or condo association loans are finding that this market niche can provide a significant source of business, although it does come with a unique set of challenges, HOA loan providers warn.

A Growing Market HOA Loan Market

It's little surprise that banks would be interested in working in this homeowners association market given its numbers. In 2006, 286,000 community associations governed more than 23 million housing units across the United States, with roughly 57 million residents, according to the Community Associations Institute.

These condo associations and HOAs spend significant money, too. The Community Associations Institute estimates that the annual operating revenue for allcommunity associations in the United States is more than $41 billion, which condo associations spend for goodsand services-including repairs and maintenance-to keep their condominium buildings, townhouse communities and subdivisions running.

Condo Association Loan Challenges Homeowners associations, HOAs and condo associations are supposed to condo reserve money tomaintain and upgrade the common areas of their condo associations and HOAS. In condominium buildings, this can mean upgrading hallways and replacing condo building roofs. In townhouse communities or housing subdivisions itmay mean sidewalks and parks. The problem is mosthomeowners associations and condo associations donot do this properly. Its estimated that 90 percentof all condo associations do not condo reserve enough money to handle repairs. That's why the condo associations need Condo Association Loans or HOA Loans to replace that leaky roof or crumbling driveway.

The one piece of collateral a condo association or HOA has is the legal right to levy condo unit owners in the formof condo association assessments or monthlycondo fees. Holding this right this condo assessment right as collateral, HOA loan providers or condo association loan providers could put a receiver in place to collect monthly condo assessments or condo fees to pay back the HOA loans if the condo association were to default. Because of this, the HOA loan interest rates may be a bit higher.

Condo Association Loan providers must also be preparedto contend with a revolving voluntary condo boards. But might just create an opportunity to put some of HOA loan providers and condo association loan providers small businesses lending skills to work.


HOA Loan or Condo Association Loan uses

HOA loans and Condo Association Loans to community associations, condo associations and HOAs are becoming more popular. HOA Loans, also knowns as Condo Association loans are a great alternative to special assessments to condo association owners, because the condo association get the HOA Loan or Condo Association Loan proceeds up front and the HOA loan can be paid off over time, enabling the HOA or condo association to build in the cost of HOA loan into future condo fees or sporadic, smaller condo assessments.

Some uses for HOA loans include, but are not limited to:

  • Purchasing condo units or new property for common use
  • Construction defect litigations against condo developers
  • HOA reserve and Condo reserve funding
  • Condo Association elevator repairs and replacement
  • Condo Association brick re-pointing
  • Condo Association roof replacements
  • new heating and plumbing, air conditions, boilers, windows for Condo Associations
  • Condo Association building lobby renovations
  • HOA parking lot repairs and re-paving
  • Condo building or repairing water, sewer and electricty infrastructure
  • Refinancing of exisiting HOA loans or condo association loans
  • Condo Association building or repair of common areas including community centers, tennis courts, golf courses, club houses, and other facilities.

HOA Loan and Condo Association Loan providers usually work with condo associations to provide innovative HOA loan structures to just about any situation. Other solutions include a Condo Association Credit Lines which HOAs can tap at their discretion to increase their cash flow in the form of condo reserves.


HOA Loans Are Quickest Start To Repair Projects

A Homeowner's Association (HOA) or Condo Association is a non profit association that takes care of the common areas of a housing development area. The job of a Homeowner's Association, HOA or condo association is to take care of the upkeep and improvements of a association property and they need the money to conduct repairs and improvements.

While the condo associations do have condo reserves some major improvements or repairs may over tax these condo reserves and end up in depleting all of them.

In case of charging an HOA special assessment on the HOA members for raising this amount may lead to delays and non conformance from all the condo owners and in some cases after getting the approvals the condo association may find it difficult to get the money from the condo owners which may stall the work half way through.

Homeowner's Associations, HOAs and Condo Associations can take out an HOA loan or condo association loan from HOA loan providers and can quickly start work on the pending up gradations or repairs without significantly burdening its condo association members.

The benefits of an HOA Loan or condo association loan for the HOA members or condo owners are that their individual credit worthiness has nothing to do with the HOA loans and condo association loans and condo owners don't have to worry about anything but choosing the right HOA Loan repayment plan. Additionally there are some HOA Loan and Condo association loan friendly banks with divisions specifically dealing with HOAs and condo associations that makes it a tad easier for them to get the HOA loans and condo association loans.

That does not however mean that condo association can get their HOA Loan or condo association loan in a jiffy. Most HOA loan providers require HOAs to go through a rigorous HOA loan application process wherein the banks study their condo reserves, cash flows, delinquency, foreclosures and other financials and in some cases the HOA loan provider may also require the Condo Association to be managed by a Certified Common Interest Development Manager.

Normally the HOA loan providers will provide condo association loans to a Homeowner's Associations and condo associations to carry out improvement to facilities such as pools, saunas, playgrounds etc. or to carry out repair work on sidewalks, roofs, parking spaces etc.

Once the Homeowner's Association, HOA or condo association decides for itself the amounts of the HOA loan or condo association loan they can get the same appraised by a condo association loan provider and then choose from a host of options for HOA loan repayment. Since the whole condo association is borrowing the money individuals are not required to give out their personal information and they can choose the HOA loan repayment plan that suits them the most.

So in effect while the whole condo association is borrowing money, all the condo owners need not repay the condo association loan in the same manner. Each condo owner can choose from the various condo association loan re-payment options that the HOA loan provider presents them with depending on his situation.

The various HOA loan repayment options include getting into a special condo assessment with the HOA loan provider where the individuals will have the option repaying the HOA loand or the condo association loan over a fixed term with reasonable interest rates. A special assessment is nothing but an improvement or repair that has been done on a property and for which bonds are issued to repay the cost that has been incurred.

The amount of this HOA loan or condo association loan can generally vary from anywhere from $50000 to $10 million with a HOA loan repayment period of one to seven years.

If on the other hand an individual can arrange cash there is no need to take any or HOA loan or condo association loan and they can straight away pay cash.
One can also take another condo loan by means of an equity loan or equity line of credit generally advised if there is some tax benefit to be derived out of it.

The least preferable means is by taking an advance on the credit card, this will entail a very high rate of interest and is only advised when there is something like airfare points or other reward programs attached with it.

Normally for collateral the HOA loan provider or Condo Association loan provider will not take anything from the condo owners rather they will take an assignment on any condo association special assessment related with the HOA loan repayment and the condo association's lien rights and assessment rights which they have over the condo owners.

While a condo owner may not have much choice in deciding whether they need that new gym or not at least they have the independence of deciding what HOA loan or condo association loan repayment plan they choose, be sure to go through the fine print and check with your tax advisor before finally settling on any HOA loan repayment plan.

More about using condo association loans and HOA loans to fast track condo association and HOA projects.



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Some loan uses include:

  • Repairs & Improvements
  • Restorations
  • Capital purchases and buyouts
  • Reserve funding
  • Refinancing of current debt obligations
  • Litigation and Insurance funding

General Requirements:

  • Minimum of 25 units
  • Minimum loan amount of $250K