COMMUNITY
ASSOCIATION LENDING DURING COVID-19
Interest rates are near historic lows due to the pandemic’s impact on the economy. As a result of the pandemic and concerns about economic stability, most financial institutions have made a few adjustments to their traditional credit evaluation and policies. However, based on the relatively low interest rates, now may be a good time for community associations to obtain a loan or refinance an existing loan. The primary benefit of low rates is its stimulating effect on economic movement.
HOW LOW INTEREST RATES CAN HELP YOUR COMMUNITY
A low interest rate loan can help fund community association’s capital improvements. HOA loans and lines of credit allow associations to fund a variety of projects and expenses - from common area improvements to maintenance and repairs. Many homeowner associations use loans or lines of credit as alternatives to a special assessment for unexpected expenses. They can even take out a loan to pay their annual insurance premiums upfront, if the insurance company offers a discount for paying for the year in advance.
Many associations obtain loans as an alternative to imposing a special assessment or depleting reserves. The special assessment requires homeowners to raise funds expeditiously for the planned capital project. Consequently, they must provide the funds up front.
Conversely, a loan allows homeowners to plan and pay for the cost of the improvements and/or repairs in smaller assessment increases. Lump sum special assessments can be hard to fit in a homeowner’s household budget, especially in these unstable times, making them less likely to be able to pay, causing delinquencies for the association. As a result, obtaining a loan will allow homeowners to budget a smaller increase to their assessment over the life of the loan, and potentially less delinquencies for the association.
Loans also help spread out the cost of common area improvements over time, and assigns the cost of those improvements to the people who are benefitting from them the most. It also allows repairs and maintenance to be performed quickly, at today’s prices.
www.cai-illinois.org • 847.301.7505 | 9
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