CondoCorp Term Financing™ – FAQ
Q. How do we know if we should borrow?
A. Deciding whether to borrow is a matter for the condominium board and unit owners, with input from professional advisors, including whomever assists in planning the reserve fund requirements.
Q. What kind of project is eligible for financing?
A. Virtually any type of repair or maintenance project can be financed, including: roofing, brick pointing, garage work, windows, balconies, fire retrofitting, elevators, CFC compliance, security systems, landscaping, waterproofing, heating and air conditioning, and general refurbishing.
Q. What about delaying the work?
A. The corporation should look at the work to be done and the consequences of delaying or spreading the work over several years. While deferring work may save financing costs, it can dramatically increase future construction costs and may negatively impact market value in the interim.
Q. How long do we have to repay the loan?
A. The repayment term ranges from 5 years to 25 years, but the interest rate cannot be fixed for longer than five years. If you choose a repayment term longer than five years, the balance outstanding at the end of five years is either paid in full or the interest rate is fixed at then current rates. This is much like renewing a mortgage after a five-year term.
Q. Should we repay the loan as soon as possible?
A. Prompt repayment (shorter amortization) will reduce the financing costs, but it is important to evaluate what the owners can reasonably afford to pay monthly. If owners cannot meet monthly payments, their ability to retain their units may be threatened. While the work is necessary, unit owners should not be put under too much stress.
Q. What is the monthly payment?
A. As with any loan or mortgage, the monthly payment depends on the amount borrowed, the term of the loan and the interest rate. In our experience, an affordable monthly payment for each owner is usually the most important issue. Financing is customized to achieve this whenever possible.
Q. How do we actually get the funds?
A. Once your financing is approved (usually within 48 hours), the implementation is simple. The turnaround time to close the loan is usually within a two week period.
Q. What about legal liability?
A. Your corporation’s lawyer will recognize the documentation as being fairly standard for this kind of financing. It is important that the borrowing is properly approved in accordance with the corporation’s by-laws and the Condominium Act. In this regard, a standard opinion of the corporation’s lawyer will be required. There is no mortgage security taken and unit owners are not required to sign individually. Each owner is, however, liable for his or her proportionate share, just as he or she would be liable for any other expense approved and incurred by the corporation.
Q. Where can I learn more about Condo Term Financing?
A. Please visit the Articles and News sections, or contact a Morrison Financial representative.