By now, you’ve heard we have a big project on the horizon, and we’re currently reviewing how we’ll finance it. For a few reasons we’d be happy to explain, we don’t believe we’ll have enough funds in the association’s operating budget or reserves to cover the project’s entire bill.
We understand special assessments—even though they’re a one-time fee—can be tough to swallow. That’s why we’re also considering securing a loan.
Lending rates are very low right now, which makes a loan an attractive option. Through a loan, a lender is using an assignment of assessments as collateral.
Yes, a loan still has to be repaid and, because of interest, will lead to a higher cost to the association than a special assessment. However, a loan means the association will have all the funds up front to complete the project. We’ll be able to enter into contracts without worrying about whether all owners will pay a special assessment in full, on time and without the delay and cost of chasing delinquent owners.
Borrowing has many of the equitable features of reserves because the debt service is paid in modest amounts over a period of years. The obligation transfers from one owner to the next as sales occur, thus spreading the costs and benefits in the same manner as reserves.
We’ll be happy to share more details about the project or securing a loan. Attend open board meetings and let us know what you think.
And remember, whether we end up issuing a special assessment or securing a loan, we have the greater good of the association in mind. Ultimately, this project is about improving your home and your community, and will keep our association a wonderful place to live for years to come.
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