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Home Owner Association Lending

Is your condo association looking to make capital expenditures?

At Simsbury Bank, we specialize in meeting your needs from your first contact with the bank, during your loan closing and throughout your relationship. Let our condominium association experts work with your board or members to answer any questions that may arise.

From term sheets, specifically designed to meet your association’s needs to competitive loan terms, Simsbury Bank is proud to have earned state-wide recognition as one of the premier community banks in Connecticut.

Find out how your association or property manager can benefit from working with one of our dedicated condominium association relationship managers today!

For more information or to speak with a dedicated condominium association relationship manager, contact
Donna McCombe.

To download a copy of our HOA loan application, click here.

Frequently asked questions regarding Simsbury Bank Loans to Community Associations:

Is the application complicated?

No, it is one page back and front. Simply download and print the application, fill out the requested information, and email, fax or mail completed forms to:
Donna McCombe
86 Hopmeadow St., Weatogue, CT 06089
dmccombe@simsburybank.com
Fax: (860.408.4679)

If we require any other items later on we’ll ask for them.

What will the bank finance?

The bank will fund up to 100% of the project cost for maintenance or capital improvements including a contingency and any related costs.

What are the loan rates?

Interest rates are set to the Boston FHLB Advance Rate or Prime Rate which changes daily with a spread. During the credit line period (project build out), interest rates float with Prime. During the amortizing loan (term period) the interest rate is calculated at the Boston FHLB Advance Rate with a spread and can be fixed for different increments of time. You will find our rates to be extremely competitive in the market place. We can also provide a loan proposal with estimated rates and terms for discussion purposes to share with the board.

What is the typical loan structure?

Term length is negotiable and depends on the type of capital improvement project (paving, roofs, siding, etc.). We can go up to 15 years if the project is a full envelope renovation, otherwise the maximum, loan term is generally 10 years depending on the estimated life of the improvements or repairs.

We offer a line of credit for the project build out period up to 24 months. At the end of the line period any amount outstanding would convert to a fully amortizing term loan. During the line of credit period the association will pay interest only on the amount borrowed. We will work with the community to find a structure that works best for you.

How do I obtain my money?

With a line of credit you will submit advance requests as the project progresses. The funds are then transferred to whichever account you have specified. The association then in turns pays the contractor.

If the loan is closed as a term loan, all of the funds will be placed in a deposit account at closing with a hold placed on that account. Similar to the line of credit, advance requests must be submitted to release funds.

The advantage of using a term loan is that the association locks their interest rate in at time of closing and begins the amortizing term loan. The association saves any interest it would have paid during the line of credit period.

What is the collateral?

We take an assignment of Common Charges/Homeowner Assessments (the dues). You will continue to operate as always with no disruption to how dues are collected. We do not place liens on individual homes or ask for personal guarantees. However, if the loan request is to purchase real estate (unit), a mortgage lien may be requested and in some circumstances a pledge of some amount of cash balances may also be requested.

Are there any fees or additional expenses?

There is no application fee. There may be a negotiable loan origination fee and the only other cost of obtaining the loan is the legal expense at the closing. The association will have to engage an attorney to close the loan on their behalf. The association attorney will need to provide an opinion letter opining to the association’s ability to borrow money and to pledge assessments as collateral for the loan and that the association is in good standing with the state.

The bank also engages an attorney to represent the bank. We will provide you with an estimate of the bank attorney’s closing costs in the commitment letter. There may also be miscellaneous filing, flood search and overnight delivery fees associated with the closing.

Are there any prepayment penalties?

No. Prepayments can be made any time during the term of the loan with no penalty.

What are the basic requirements in order to qualify for the loans?

  • The community needs to have at least 20 units.
  • Unit owners past due on assessments over 60 days should not be more than 10% of the total number of units. We look at regular and special assessments, no fines, fees or violations. We’ll want to make sure you have a collection policy in place and are following it.
  • The development should be primarily owner occupied with at least 60% of the home’s owner occupied. If more than 40% of the units are investor owned, we may request additional collateral in the form of pledged deposits.
  • No one unit owner should own more than 10% of the units. No more than 30% of the units should be owned by multiple unit owners.
  • The community cannot be developer controlled.
  • If the assessment increase needed to pay back the loan is double or more what owners are currently paying, we may ask the association to put the increase in place for 4 months prior to closing the loan without delinquencies increasing. This demonstrates to both the bank and the association owners’ the ability to pay the additional debt.

Do I need a reserve study?

No, they are encouraged but not required. You just have to be able to tell us about any other capital repairs/replacements that may occur during the term of the loan.

What if I don’t have a management company?

No problem, we will work with the association directly.

Do I have to sign contracts for the work in order to qualify?

No, we will ask for copies of any bids or estimates. We want to make sure that you’ve done your homework and have a good idea of what the project will cost.

How fast can I get an answer and close the loan?

Once we have all of the required application items, we can make a decision quickly. After approval we issue a commitment letter. When the signed commitment letter is returned the closing process starts. When the signed commitment letter is returned the closing process starts, the loan should be able to close within 30 days.

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