An HOA, or homeowners association, is typically in charge of maintenance for a subdivision. It creates the laws that govern the community and ensure safety and aesthetic value, as well as potential improvements and similar matters. However, some HOAs can become involved in more specific legal matters, especially when a homeowner wants a new mortgage. In these cases, the HOA may require refinance fees, or fees connected to the refinance process, before the loan can be completed.
HOAs and Refinances
At first, it may seem that a homeowners association should not participate in a refinance. A refinance is an arrangement with a lender that allows the homeowner to take out a new loan, replacing the first mortgage entirely and potentially borrowing some extra cash for other projects. This is a contract between borrower and lender, but it is also a loan that will affect the value of the home and its equity. Not all HOAs care, but some may have requirements for making such a financial move written in their bylaws.
Lender Approval Fees
Lender approval fees refer to the fees that lenders add to closing costs, the bundled expenses for creating a new mortgage, even a refinance. The lender must often approve a mortgage based on the solvency and activity of an HOA. While the HOA is not directly involved, the lender may still run a credit check or inspection of the condo/subdivision. The fee for this step may be included in closing costs, creating an HOA-related fee that borrowers will have to pay.
Refinance certificates are documents that may be specifically required from the HOA, giving permission to make the refinance. In tightly controlled communities, such loan or refinance certificates can be common. Borrowers must apply to the HOA for the documents and pay a refinance fee in order to receive. This helps cover HOA costs and also allows the HOA to keep an eye on community solvency and expenditures in general. An HOA may not want to approve an refinance if the extra cash will be used for an addition that violates HOA standards.
HOA fees are mostly in the form of dues that must be paid on a monthly basis. If a homeowner applies for a refinance with late HOA dues owed, then both the HOA and the lender usually require that the fees be paid in order to progress with the refinance. The late fees may give the HOA a claim on the house, which the lender does not want interfering with its own claim.
- PrimeLending. "Types of Refinance Loans." Accessed April 28, 2020.
- Freddie Mac. "Working With Your Lender to Refinance Your Loan." Accessed April 28, 2020.
- Consumer Financial Protection Bureau. "Request Multiple Loan Estimates." Accessed April 28, 2020.
- Consumer Financial Protection Bureau. "Is There Such Thing as a No-cost or No-closing Loan or Refinancing?" Accessed April 28, 2020.
- Freddie Mac. "Costs of Refinancing." Accessed April 28, 2020.
- Redfin. "What Is a Yield Spread Premium?" Accessed April 28, 2020.
- Consumer Financial Protection Bureau. "Should I Refinance?" Page 2. Accessed April 28, 2020.
- Wells Fargo. "Thinking About Refinancing?" Accessed April 28, 2020.
- Citi. "Thinking of Refinancing?" Accessed April 28, 2020.
Tyler Lacoma has worked as a writer and editor for several years after graduating from George Fox University with a degree in business management and writing/literature. He works on business and technology topics for clients such as Obsessable, EBSCO, Drop.io, The TAC Group, Anaxos, Dynamic Page Solutions and others, specializing in ecology, marketing and modern trends.