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How You Benefit
| > Why
Choose a Loan? | >
Which Loan is Right for You?
| > Homeowners
Payment Options |
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| The
Benefits of Loans for Homeowners Associations |
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Loan
Rates as of 07/21/2008 |
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| Upkeep
and improvements to a property are key to maintaining and improving
its value. Homeowner and community association directors have a fiduciary
responsibility to repair depreciating structures and common-area facilities.
What's more, homeowners - and potential buyers - want upgraded, more
secure facilities. Union Bank of California's HOA loan program has
been designed with these unique needs in mind. |
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| Needed
work can be completed more quickly, as total funds become available
for use much faster than through the traditional special assessment
process. The financial impact on homeowners can be reduced, as they
can avoid making a lump sum special assessment payment. Homeowners
can pay their share over time to reduce the impact on their personal
finances. Choose from fixed or variable rate loan programs, depending
on which approach makes the most financial sense for your association's
unique circumstances. |
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| Why
choose a Loan? |
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| Loans
Offer an Alternative to Spending Reserves. The capital outlay for
major repairs and improvements can overtax an association's reserves,
requiring special assessments to pay for specific projects or to rebuild
reserves. While special assessments may make economic sense, they
also impose financial hardship on members and may be difficult to
get approved. Once approved, the association may have difficulty collecting
payments from all its members. Directors may then defer maintenance
work - although this can leave them open to charges of negligence,
particularly if there are health or safety issues involved. Or, they
may try spreading the work out over time - which can raise the final
cost of the work, as well as inconvenience residents. |
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| On
the other hand, borrowing money for repairs or improvements makes
all needed funds available more quickly. And since financing work
through a loan generally requires only a small increase in monthly
assessments to cover debt servicing, there are fewer objections from
homeowners. |
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| Union
Bank of California's HOA loan program makes financing available for: |
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Repair
or replacement of worn-out major components, such as roofs, fences,
decks, paint, sidewalks and parking structures. |
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Improvements
to association facilities, such as new pools, saunas, playgrounds
and perimeter gates. |
| Which
Loan is Right for You? |
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| The
fees, rates and other details for any individual loan are determined
at the time a comprehensive application is made to the bank. However,
the general parameters of our HOA loans include: |
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A $50,000
minimum, and $10 million maximum. |
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An initial
structure as a "non-revolving" line of credit during the
construction phase of six months to one year. Once construction is
completed, the line of credit is converted to a term loan. |
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Terms: one to seven
years. |
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Fixed and variable
interest rate programs available. |
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collateral for the loan, the bank normally takes an assignment of
any assessments connected with repayment of the loan plus the association's
lien and assessment rights, and typically does not require personal
guarantees or trust deeds against the residences of individual association
members. |
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| Homeowner
Payment Options |
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| Once
you have identified the cost of reconstruction and established the
amount you need to borrow, the members of your association have a
number of options to meet their portion of the association's funding
requirement. Depending on their individual financial situation, each
homeowner can choose from the payment options described below. |
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Pay a
special assessment over time to repay the HOA commercial loan the
association has arranged through Union Bank of California. Interest
rates are reasonable and can be fixed over the loan term. This is
a convenient choice for your members, as no personal information will
be required from individual homeowners, and the loan is an obligation
of the association as a whole. |
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Apply for financing secured by real property, such as a second mortgage
or equity line of credit. Homeowners should consult their tax advisor
to determine whether or not certain types of loans offer tax advantages.
For homeowners who choose this option,
special individual loan programs are available from Union Bank of
California. |
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Pay cash
by drawing down savings or liquidating other investments. For your
members with available funds, this option may make sense, depending
on how they currently have their funds invested. An individual homeowner
should analyze this option carefully - while interest rates for borrowing
funds may be higher than the interest they are earning, it's important
to remember that their earned interest is generally subject to taxation. |
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Use a
credit card to obtain a cash advance. Normally, this would be the
least desirable option due to high interest rates, zero tax benefit
and faster payoff schedules. However, some homeowners may prefer this
option because they earn points for free airfare or other rewards.
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| To
learn more, email an HOA Banker. |
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