Habitat Preview April : Page 1
Ask the Mortgage Broker By Patrick B. Niland Condo Borrowing Several previous boards ignored or were afraid to tackle the serious problems at our condominium. Recently, a group of owners committed to restoring the Q health of our property was elected as an entirely new board. Unfortunately, we soon learned that the situation is much worse – and more expensive – than any of us had expected. While the required assessment might be affordable to many of the newer owners in the building, it clearly is not for most of those who have lived here for a long time. One of them suggested that we get a loan instead of an assessment, but several owners are vehemently opposed to debt. Can a condo borrow money? And, if so, could some owners pay their portion of the assessment in a lump sum to avoid a loan’s interest charges? rates. Amortization rarely exceeds 10 years (although I recently arranged a 15-year fixed-rate loan), making every loan self-liquidating over its term. As “collateral,” lenders take an assignment of the association’s right to collect common charges from the unit-owners. The biggest hurdle for most condos, though, is securing the required unit-A Your first question has a simple answer: yes. Ever since August 1997, when Governor George Pataki signed an amendment to the 1964 Condominium Act, condominiums and homeowners’ associations have been able to borrow money for repairs and capital improvements. Terms range from 5 to 10 years, with either floating or fixed interest 42 HABITAT april 2012 owner approval. Association bylaws typically stipulate that a large portion of the owners (usually 75 percent) approve any proposed loan. You’d be surprised how many debt plans fail this crucial test. In that case, what’s a board to do? Some just forge ahead with an assessment and let the chips fall where they may. Owners either pay up or move out. Other boards try to complete the necessary work on an extended schedule to spread the financial burden over a longer period. That route often results in rework and higher cost. A few try to arrange home equity loans for any owner who wants or needs one, but that process (which depends on individual owner credit ratings) can delay the start of work. www.habitatmag.com
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