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Fannie Mae Senior Housing Loans
Fannie Mae Seniors Housing Loans provide financing for independent living, assisted living, and Alzheimer’s/dementia care facilities. Loans start at $5 million, permit LTVs of up to 80%, and are generally non-recourse.
With more than 10,000 Americans turning 65 every single day, it has 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.)
Keep reading below to learn more, or click here to download our easy-to-read Fannie Mae Seniors Housing Loan term sheet.
Sample Fannie Mae Terms For Seniors Housing Loans in 2024
Size: $5 million minimum (exceptions can be made on an individual basis)
Terms: 5 to 30 years
Use: Acquisitions or refinances
Amortization: Up to 30 years
Interest Rates: Fixed- and adjustable-rate loans available
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
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
1.30x for independent living only
1.40x for 100% assisted living properties
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
Properties must have between five 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 five years of successful experience in senior living communities and must have owned/managed five or more senior housing properties
Advantages of Fannie Mae Seniors Housing Loans
Competitive interest rates
Most loans are non-recourse
Flexible prepayment options
Supplemental financing is allowed
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 of Fannie Mae Seniors Housing Financing
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 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
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
Case Study: Senior Housing in Portland
Experienced investor Teresa identified an excellent opportunity in the senior housing market. A well-maintained assisted living facility in Portland, Oregon, comprising 40 units was available for $7.5 million. The property had been operating successfully for several years and was an ideal addition to Teresa's growing portfolio of seniors housing.
Teresa planned to put down 20% of the purchase price ($1.5 million), leaving a balance of $6 million to finance. After carefully considering her options, she decided to apply for a Fannie Mae Seniors Housing Loan. Her loan request was well within the limits set by Fannie Mae for seniors housing properties, and her solid track record in the industry enhanced her application.
Accompanied by necessary third-party reports, Teresa submitted her application. Fannie Mae approved the request, offering a loan of $6 million with a fixed interest rate for a term of 30 years. The terms of the loan included a non-recourse clause, which limited Teresa's personal liability.
Thanks to the competitive interest rate and flexibility of the Fannie Mae Seniors Housing Loan, Teresa was able to acquire the assisted living facility, effectively expanding her senior housing portfolio. Additionally, the long-term amortization aligned well with her investment strategy, ensuring predictable cash flow over the years.
This is a fictional case study provided for illustrative purposes.