How a Homeowners Association Loan Can Help Your Community

Running a homeowners association (HOA) means keeping your neighborhood clean, safe, and functional—not just today, but for years to come. Whether your board is planning a large-scale improvement project or covering unexpected pool repairs, funding those expenses can be a challenge. That’s where HOA loans come in. Keep reading to learn more about how HOA loans work, when it might make sense to consider one, and how your community could benefit from borrowing strategically.

Can a HOA Borrow Money?

Yes, homeowners associations can borrow money from banks. And no, it’s not unusual—in fact, it can be a smart way to save your reserve funds, complete needed improvements, and enhance your neighborhood without imposing steep dues increases on your community members.

What Is a HOA Loan?

A HOA loan is a type of financing designed specifically for homeowners associations and community associations. Like any other loan, the HOA borrows a set amount from a bank or lender and agrees to repay it over time, often with a fixed interest rate and monthly payments.

These loans are typically used to fund capital improvements, large-scale repairs, or other major expenses that go beyond day-to-day operations. That could include anything from community center roof replacements to repaving roads, upgrading pool areas, installing new security gates, and more.

Depending on the size of your community and the scope of the project, HOA loans can range from tens of thousands to millions of dollars.

Why Do Homeowners Associations Apply for Loans?

Many people are surprised to learn that HOAs can, and often do, take out loans. But the reality is that not every community has enough in reserves to cover major expenses upfront. And even for those that do, borrowing may still be the most strategic option.

Here’s why many associations choose to borrow with HOA financing:

• Avoid Large Special Assessments: Instead of asking homeowners for thousands of dollars out of pocket for unexpected expenses, HOA loans can help spread the cost over time—making it more manageable for everyone.
• Complete Projects Sooner: With financing, your board doesn’t have to wait years to build up your reserves before moving forward on essential improvements.
• Maintain Property Values: Delaying maintenance or improvement can negatively impact curb appeal and home prices. Timely upgrades keep your community desirable and competitive.
• Take Advantage of Favorable Rates: In certain interest rate environments, borrowing may be more cost-effective than raising dues or using cash reserves.

Borrowing doesn’t mean your HOA is financially unstable; rather, it means you are taking a proactive, long-term approach to managing your community’s assets.

How HOA Loans Work

If your association is considering a loan, the process is similar to applying for any other type of commercial loan. Here are the steps you can typically expect:

1. Determine Your Needs

First, your HOA board will identify the scope of the project and estimate costs. You may want to consult with contractors, engineers, or reserve study experts to get a clearer picture.

2. Request Proposals

Next, your HOA can approach banks—like Academy Bank—that offer HOA lending. The bank will review your project, financials, and repayment strategy.

3. Board and Community Approval

In many homeowners associations, a vote of the board (and sometimes homeowners) is required to approve borrowing. Be sure to check your governing documents.

4. Loan Terms and Closing

Once approved, the HOA lending bank will finalize the loan terms, including the interest rate, repayment period, and any collateral requirements.

5. Project Funding and Repayment

After closing, funds can be disbursed to pay for your project. Your HOA then begins regular payments over the life of the loan.

At Academy Bank, our lending specialists work directly with HOAs to tailor financing options to your budget and long-term needs. Whether your community is led by a HOA management company or self-managed by board members, we’re here to help guide you through the process.

Planning Ahead for the Loan Approval Process

When evaluating a homeowner’s association for a loan, banks typically review several key factors:

• Size of the HOA and number of units
• Current reserves and reserve study (if available)
• Delinquency rates among homeowners
• Current dues and planned increases
• Governing documents and board authority to borrow
• Recent financial statements and budgets

These criteria help lenders assess the association’s ability to repay the loan and determine appropriate loan terms. HOAs with well-maintained records, low delinquency rates, and active reserve planning are often viewed more favorably.

As part of that preparation, it’s also important to understand how the loan itself would fit into your community’s budget. Academy Bank offers a loan payment calculator to help estimate payment amounts, interest costs, and repayment timelines. This tool can be a helpful first step in determining what your community can afford and how to structure your financing plan.

If your board is in the early stages of planning a project, we recommend using the calculator alongside your reserve study or project estimates to create a full financial picture.

The Big Picture: How HOA Loans Can Benefit Your Community

A well-timed homeowners association loan can support the long-term health and appeal of your community. It’s not just about funding a project—it’s about making responsible financial decisions that protect property values and ensure a high quality of life for residents.

Instead of scrambling to cover costs or reacting to urgent maintenance needs, financing allows your board to plan ahead. In fact, homeowners benefit from updated amenities and fewer surprise assessments, while lenders enjoy working with informed boards that take their fiduciary responsibilities seriously.

When used strategically, a HOA loan is an investment in your neighborhood’s future!

Explore HOA Bank Services with Academy Bank

As your trusted partner in HOA banking, Academy Bank offers more than just accounts—we offer strategic support. Whether you need help setting up a HOA bank account, managing cash flow, or securing financing, our team is here to assist.

We’re experienced in helping HOAs improve their communities through tailored financial services and customized loan solutions. If your board is exploring options or preparing for a major upgrade, reach out to Academy Bank today!

Let’s work together to build a better, stronger future for your community.

HOA Banking