Bank Denied Your HOA Loan? Here Are Your Refinance Options

Introduction

If your condominium or homeowners association applied for a loan with a bank and was declined, your next most common option is to seek financing from a private lender. Private lenders often have more flexible underwriting standards and can provide capital when banks are unable to approve a loan. This can allow an association to complete urgent repairs, fund reserves, or stabilize its finances.

However, an important question for many boards is whether a private loan can eventually be refinanced with a traditional bank. In other words, if a bank declined the loan today, does that mean refinancing with a bank in the future is still possible?

To answer that question, it is important to understand why banks decline HOA loans in the first place. The most common reasons include delinquency levels, the size of the community, the mix between investor-owned and owner-occupied units, and the strength of the association’s reserve funds. Each of these factors affects the association’s risk profile in the eyes of a lender, and some of them can improve over time while others are structural characteristics of the community.

Understanding these factors can help boards determine whether a private loan should be viewed as a short-term bridge before refinancing with a bank, or whether private financing may remain the long-term solution.

Delinquency Rates

One of the first metrics banks examine is how many unit owners are behind on their assessments. Most banks require delinquencies below 10% of units, and some lenders prefer below 8%. High delinquency signals potential instability in the association’s revenue stream. Since HOA loans are typically repaid through monthly assessments, lenders want confidence that those payments are reliably collected. If a large portion of homeowners are not paying dues, the association may struggle to service the loan, especially during economic stress.

This is often improvable. Boards can strengthen collections policies, pursue liens and legal enforcement, set up payment plans with delinquent owners, and improve property management oversight. If delinquency drops meaningfully over time, the association may become eligible for refinancing with a traditional bank. In many cases, short term private financing can stabilize the situation until delinquency levels fall to acceptable thresholds.

Unit Count

Many banks have minimum unit thresholds before they will consider lending to an association. Typical requirements are 25 to 30 units at minimum, and some lenders prefer communities with 50 or more units. Smaller communities often struggle to obtain financing because the risk is concentrated among fewer owners. For example, a ten unit building with two delinquencies already has a 20 percent delinquency rate, while a 200 unit community with the same number of delinquencies has only a 1 percent delinquency rate. Banks prefer larger associations because revenue streams are more diversified.

Unit count is generally structural and cannot realistically change. Because of this, small associations often rely on specialty lenders, private lenders, or credit unions willing to work with smaller communities. In many cases, refinancing with a traditional bank may simply never be an option for very small communities.

Investor Versus Owner Occupancy Mix

Another important metric is the percentage of units owned by investors versus owner occupants. Many banks require at least 60% owner occupancy, and some lenders prefer over 70% owner occupancy. High investor concentration can raise concerns because rental properties historically show higher delinquency rates, more turnover, and greater volatility during economic downturns.

When investors own a large share of units, the association’s financial stability can be tied to rental market conditions rather than resident stability. This factor can sometimes improve but usually takes time. Boards may influence occupancy mix through leasing restrictions, rental caps in governing documents, and policies that encourage owner occupancy. However, these changes take years to meaningfully shift the ownership profile because they depend on unit sales and turnover. As a result, investor concentration is partially structural and often limits refinancing options in the short term.

Reserve Levels

Reserve funds are savings set aside for major repairs and capital improvements. Banks look closely at reserves because they indicate whether the association is financially disciplined, able to handle future repairs, and less likely to require emergency assessments. Typical lender expectations include healthy reserve balances, evidence of regular reserve contributions, and a recent reserve study. Low reserves often signal deferred maintenance and potential future financial stress.

Reserve levels can improve over time but require planning and discipline. Associations can strengthen reserves by increasing monthly reserve contributions, implementing special assessments when necessary, and conducting reserve studies that guide long term financial planning. If reserves grow stronger over several years, the association may become a stronger refinancing candidate.

What These Factors Mean for Your Refinance Path

When a bank declines an HOA loan application, it is often because the association does not meet one or more of these criteria. Some issues are temporary and fixable, such as delinquency levels and reserve balances. Others are structural and difficult to change, such as unit count and investor concentration. Understanding which category your association falls into can help boards develop a realistic financing strategy. In many cases, associations use specialized or private financing like Samtov Finance as a bridge, allowing them to complete repairs, stabilize finances, and improve the metrics that banks require for refinancing.