Is A Loan Ever A Good Idea For Your Homeowners Association?

Financing a renovation project or common area repairs are usually done with funding that the homeowners association has set aside in an account.  An account such as a reserve fund is supposed to have stable and sufficient funding to offset ongoing deterioration by conducting a current reserve study.  Yet, there are times when some homeowners associations lack the funds required to pay for the project in full.  What option is in the best interest of the homeowners association?

 

 

Maybe postponing the project is an option depending on the extent of the work and the light inconvenience it presents homeowners.  Another option is to divide the project up into a longer time frame so more funds can be accumulated to cover the cost of the project.  If those are unacceptable then the other alternatives are a special assessment or secure a loan.

 

Even though they are a one-time fee, special assessments are a financial burden on members that may take longer to collect than expected.  The objective is to keep the neighborhood attractive so property values are protected and members stay positive on the neighborhood website.  How will a loan make that happen?

 

 

Homeowners and potential buyers expect the homeowners association to fulfill their fiduciary responsibility by completing projects in a timely fashion.  By securing a loan, projects are completed before they get any worse and homeowners avoid paying a large amount all at once.  However, a loan still needs repaid and with that comes interest but the financial burden is initially far less troublesome.

 

That decision can be avoided by keeping the reserve study current so a sufficient amount is always maintained in the reserve fund.  Potential homeowners that navigate the neighborhood website should look for signs of repairs and updates not being recent to rule out future financial issues.