Roof Replacement Financing for HOAs: How Boards Pay for a New Roof
An HOA can pay for a roof replacement with an association loan repaid from assessments, instead of emptying reserves or levying a special assessment. Price the roof from current bids, not the reserve study, add a contingency, and start applying 3 to 6 months before you need the money. In the loans we arrange, board members sign for the association, not personally.
How can an HOA pay for a roof replacement?
Roof replacement is one of the most common reasons boards call us. An association can pay for a roof in three ways, alone or together: from reserves, through a special assessment on every owner, or with an association loan repaid from assessments over time. Our comparison of a special assessment and an HOA loan walks through the trade-off.
An association loan is made to the association, not to any owner. It is typically secured by assessments rather than real estate. The lender cannot foreclose on owners' homes. The association's own lien against a delinquent owner is a separate power and is unaffected.
In the loans we arrange, board members sign on the association's behalf, not personally: there's no personal guarantee, and their credit isn't pulled.
A loan can also protect reserves rather than compete with them. Many lenders allow loan proceeds to fund or replenish reserves directly, including reserves that were drawn down for project costs. Policies vary by lender, so ask.
Should the board price the roof from the reserve study or from bids?
From bids. A reserve study is not a quote for work; current bids override study estimates. A study estimates the remaining useful life of each component and how well the association is funding it over the coming years. When a current bid differs from the study, plan around the bid.
The study still matters to a lender. A reserve study more than three years old is generally considered outdated. It still shows which projects are coming and how long each component should last, but construction and material costs change. Get current estimates and bids within a few months of the planned work to know what it will actually cost.
The lenders we work with are already trending toward requiring a refreshed reserve study. If you don't have a current reserve study, start one 6 months to a year before you need the money. We do not prepare reserve studies; your reserve study professional does.
How much should the association borrow for a roof?
Build the project budget by trade, and add a contingency of about 20% of project cost on top of the bid. We have seen boards under-borrow because they used the contractor's bid number without adding a contingency.
Our free HOA loan calculator estimates the payment on the amount you are considering. Our free capital planning tool lets you list the work ahead and what it's likely to cost, so the roof sits in context with everything else coming due.
What loan structure fits a roof replacement?
The loans we arrange are either fixed-rate term loans or lines of credit that convert to a term loan. Terms typically run 5 to 20 years, and longer on larger projects. Every loan we arrange is fully amortizing, with no balloon payment.
If the roof work will be done in phases, our guide to HOA lines of credit explains how draw-to-term financing works.
Lenders don't require the loan term to match the roof's life. What they watch is what else could come due before the loan is paid off. If you finance windows and the roof will need replacing during the loan, lenders would rather see the roof done now. Bundling the work likely to come due during the loan makes a stronger application.
What if insurance covers part of the roof?
A loan can cover the part insurance doesn't, but lenders want the insurer's share committed before they lend. They won't lend against an estimate that could change and leave the community short.
What will a lender ask for on a roof project?
Exactly when each document is requested varies by lender. Most loans follow three stages. To get started, a lender typically asks for the most recent financial statement, the most recent quarter-end delinquency report, the current year budget and the reserve study. The full application adds the contractor bid and project scope. At closing, the signed contractor's contract and the name of the person overseeing the project join the file.
Lenders generally want at least 3 years of year-end financial statements, audited or unaudited. Some want audited statements; many don't. Some also ask for recent month-end statements early in underwriting. Changed management companies? Earlier years can usually be pulled from the association's records or the prior manager. Talk to us before assuming you're short.
For every document by stage, see our HOA loan documentation checklist. The thresholds across the lenders we work with are in our guide to HOA loan requirements.
What does a roof loan look like in practice?
A loan we arranged for a 300-unit homeowners association in Palm Springs, California, paid for a roof replacement and plumbing repair: $2.05 million on a 10-year fixed rate, with the association's reserves preserved for future needs. It is one of the closed loans on our California page.
How long does roof financing take?
30 to 90 days is typical, and some loans take longer for a variety of reasons. Our HOA loan timeline sets out each stage from first call to funding.
Talk to us before the bids come in
If your board is weighing a loan for a roof, book a free consultation. We'll tell you what a lender is likely to flag and how much the association might reasonably borrow. There is no upfront cost, and we are paid at closing. If the loan doesn't close, there is no fee.
Boards also ask
Does my association need a down payment?
Typically, no. Across the lenders we work with, an association loan does not usually require a down payment, so the project can be funded without first collecting cash from owners. Many lenders allow loan proceeds to fund or replenish reserves directly, including reserves that were drawn down for project costs. Policies vary by lender, so ask.
What are typical loan terms?
The loans we arrange typically run 5 to 20 years, and longer on larger projects, depending on project scope and your association’s financials. Every loan we arrange is fully amortizing, with no balloon payment. We don’t place associations in balloon loans, and we help refinance associations out of them.
How current does our reserve study need to be?
A reserve study more than three years old is generally considered outdated. It still shows which projects are coming and how long each component should last, but construction and material costs change. Get current estimates and bids within a few months of the planned work to know what it will actually cost.
Can we start the roof before the loan closes?
Yes, if the association has the money to start. You can begin with your own funds and bring in the loan funds later. Without funds to start, a contractor probably won't begin work.
When should we start applying for a roof loan?
There's no single best month. Start applying when you're 3 to 6 months from needing the cash or breaking ground. That gives you time for underwriting, a vote if needed, and anything unexpected. It's better to have the money a month or two early than to have contractors and good weather ready and no funds.
Do we need binding roofing bids before we apply?
It depends on how far away the work is. 3 to 6 months out, get binding bids and formal quotes. 1 year or more out, estimates are fine.
Still deciding? Talk it through with us.
We’ll talk with any board at no charge and no obligation, just answers.