Fannie Mae Multifamily Financing for Senior Housing Developments 

Fannie Mae Insured Loans for Independent Living, Assisted Living, and Alzheimer's/Dementia Care Centers

With more than 3.5 million Americans turning 65 every single day, it's never been a better time to invest in the senior housing industry. If you're an experienced investor or developer interested in purchasing a senior housing project, a Fannie Mae Seniors Housing Loan might be the perfect fit. Fannie Mae Seniors Housing Loans have terms and amortizations up to 30 years, fixed and adjustable-rate interest options, and can be used to acquire or refinance independent living, assisted living, and Alzheimer's/Dementia care facilities. Fannie Mae Seniors Housing Loans have a minimum loan amount of $5 million, allow LTVs of up to 80%, and are assumable (with a 1% fee and approval from both Fannie Mae and the lender.) 



Sample Fannie Mae Terms For Seniors Housing Loans

Size:  $5 million minimum (exceptions can be made on an individual basis)  

Terms:  5-30 years

Use:  Acquisitions or refinances

Amortization:  Up to 30 years

Interest Rates:  Fixed and adjustable-rate loans available 

Maximum LTV

  • 75% (80% for fixed-rate, tax exempt bonds) 
  • 70% for Alzheimer's/Dementia care properties 
  • 70% for properties with a Skilled Nursing component
  • Decrease max. LTV by 5% for cash-out refinances 

Minimum DSCR 

  • 1.30x for independent living only
  • 1.40x for properties with 50% or more Alzheimer's/Dementia care 
  • 1.45x for 100% Alzheimer's/Dementia care properties 
  • 1.50x for properties with a Skilled Nursing component 
  • Weighted average calculation for properties with less than 50% Alzheimer's/Dementia care units 

Recourse:  Most loans are non-recourse with standard “bad boy” carve-outs 

Prepayment Options:  Yield maintenance, defeasance, or graduated prepayment premiums

Commercial Space Limits: Commercial space must comprise no more than 10% of the net rentable area and produce no more than 10% of the project's effective gross income

Eligible Properties: 

  • Properties must have at between 5 and 50 units
  • Properties must be stabilized, and can include manufactured housing communities 
  • For acquisitions or refinances, loans must be first lien
  • Eligible borrowers must be single asset entities
  • No properties with entrance fees are allowed 
  • Owner/operators must have at least 5 years successful experience in senior living communities, and must have owned/managed 5 or more senior housing properties   

Advantages:

  • Competitive interest rates
  • Most loans are non-recourse
  • Flexible prepayment options  
  • Supplemental financing is allowed 
  • Typically requires 90% economic occupancy for 12 months (for independent living facilities) or 15 months (for Alzheimer's/Dementia care or Skilled Nursing properties), though this may vary 
  • 30- 90 day rate locks available (early and extended rate locks are also available-- early rate locks allow borrowers to lock the rate between 45 and 365 days before closing) 

Disadvantages:

  • Requires third-party reports including an Appraisal, Property Condition Assessment, Zoning, Termite, Flood and Seismic reports (for properties in specific areas), a Phase I Environmental Assessment, and a Seniors Housing Liability Assessment Report
  • Replacement reserves are required ($300/unit per year) 
  • Typically requires $15,000 application deposit and $3,000 non-refundable processing fee
  • Typically requires a 1% origination fee 
  • A 2% rate lock fee is required (refundable at closing) 
  • Commitment fees may also be charged