The reserve study prices components. The mortgage tests compare a few budget lines to published benchmarks. Neither document, by itself, tells the board how to close a shortfall — only that one exists if the contribution sits below the study’s highest recommendation or below the percentage floor.
This article is about the funding menu boards actually debate. It is not legal, tax, or lending advice. Governing documents, state law, and the association’s counsel and manager control what is allowed.
First: name the gap correctly
Before comparing funding methods, identify the gap. A negative difference means there is no shortfall on that comparison:
- Study-pathway gap: highest recommended annual contribution − budgeted reserve contribution.
- Percentage-floor gap: (15% × budgeted assessment income) − budgeted reserve contribution (for applications from Jan 4, 2027; 10% still frames older conversations).
- Cash / project gap: money needed for a near-term repair versus cash actually in reserve accounts.
Mortgage-test conversations usually start with (1) or (2). Special assessments and loans often appear when (3) is urgent — roof, concrete, elevators — even if the annual contribution line also needs to move.
An indicative ReserveGap check focuses on (1) and (2) from four inputs. The paid report illustrates a separately entered financing amount and timing through special assessment, amortizing loan, and hybrid scenarios. It does not model a revolving line of credit.
Option A — Raise the ongoing reserve line
What it is: Increase regular assessments (or reallocate the budget) so next year’s reserve contribution clears the benchmark you care about.
Comparison factors: Size of the recurring contribution change, budget timing, and any required authorization. Recalculate the percentage comparison if regular assessment income also increases.
Watch for: Timing — a January 2027 application looks at the budget in force for that review, so fall budget season is the practical window. Also confirm you are measuring the correct assessment-income base (lender-permitted exclusions are easy to get wrong).
Option B — Special assessment
What it is: A one-time (or staged) charge to owners to put cash into reserves or pay for specific work.
Comparison factors: Collection timing, owner cash requirements, installment terms, and collection risk.
Watch for: Special assessment income is generally not a substitute for the annual reserve allocation lenders look for in the percentage test. You can raise cash and still need the ongoing reserve line fixed. Collection risk and hardship plans belong in the manager’s and attorney’s lane.
Option C — Association borrowing
What it is: Borrow to fund repairs or to seed reserves, then repay through assessments over time.
Comparison factors: Interest, fees, repayment term, debt service, and the timing of project expenditures.
Watch for: Debt service shows up in future budgets. A loan that funds a project does not automatically make the reserve contribution percentage look healthy unless the budgeted reserve line is also set correctly. Lenders reviewing the project will still apply their own rules.
Option D — Hybrid
What it is: Combine funding sources. ReserveGap’s hybrid illustration splits the entered financing amount between a special assessment and an amortizing loan; ongoing contributions are separate assumptions.
Comparison factors: Dollars from each source, collection and borrowing dates, combined costs, and ongoing contributions.
Watch for: Complexity. Hybrids need a one-page exhibit owners can follow: dollars by source, timing, and per-unit estimates under the declaration’s allocation method.
Per-unit shares follow the declaration
“What will it cost my unit?” is never a simple divide-by-N unless the declaration says so. Ownership percentage, residential vs commercial, and class rights matter. Any owner-facing PDF should say the allocation method and that the figures are estimates from board inputs — not invoices.
Read alongside
Sources and scope
The reserve comparison dates and study requirements are described in Lender Letter LL-2026-03, page 3. These are alternative reserve pathways within a wider lender review.
For Full Review budget and reserve-study conditions, see the Selling Guide.
Reports are prepared after checkout and emailed within 1 business day. Not an instant download. Results are indicative; only a lender’s project review decides eligibility.