Do your research before deciding on if you should get HOA financing

Borrowing money for the sake of borrowing, to build up a reserve, or to simply delay an inevitable assessment are near the top of the bad idea list when it comes to reasons a condominium or homeowner association may choose to borrow money.  On the other hand, funding improvements, taking advantage of low-interest rates, or spreading out one-time assessments over time are potentially good reasons to take out a condominium or HOA loan. Additionally, when unforeseen events, like emergency repairs, causes a reserve fund to be depleted, seeking external help may be a smart decision.

Traditionally, the boards of condominium and HOAs impose special assessments to raise cash. However, special assessments can be tricky due to bylaw limitations, voting restrictions, or member discontent. Loans have the benefit of minimizing the impact of large, one-time assessments.  Instead, HOA loans allow for be smaller increases to be spread over a longer time horizon. Distributing smaller dues-related increases or assessments over time puts less burden on homeowners who may be on a fixed income, or simply unable to afford an especially large special assessment.

The ability of owners to meet their obligations can effect the decision to get HOA financing

Another thing to consider when thinking about an HOA loan is the ability of owners to meet their obligations. A homeowner who is under financial stress may default on a large-upfront assessment. However, that same owner may be able to meet a smaller loan-related increase. Although these obligations may all hold the same position in a default situation, attaching debt to a foreclosed property may be more palatable than trying to impose a large lump sum lien.

Arch Capital Solutions acts as an advocate for your HOA. We have relationships with lenders who specialize in HOA loans.

In many states, the board may actually have a fiduciary duty to make financial decisions that are in the best interest of its members. Arch Capital Solutions can satisfy those fiduciary duties acting as the HOA’s financial advisor. We help HOAs obtain financing and choose the best proposal from multiple lenders.