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2 min read

Freddie Mac Flexible Tax-Exempt Loan (Float-to-Fixed)

Freddie Mac Flexible Tax-Exempt Loans are intended for the renovation of Targeted Affordable (TAH) properties with 4% LIHTC credits. This financing comes in floating-rate, fixed-rate, and float-to-fixed rate options, with LTVs up to 90% of market value and DSCRs as low as 1.15x.

In this article:
  1. Flexible Freddie Mac Tax-Exempt Loans for Affordable Housing Developments
  2. Sample Freddie Mac Terms for Flexible Tax-Exempt Loans in 2024
  3. Get Financing
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Flexible Freddie Mac Tax-Exempt Loans for Affordable Housing Developments

Freddie Mac's Tax-Exempt Loans are a great way to purchase or refinance an affordable housing property with 4% Low-Income Housing Tax Credits (LIHTCs) in order to make renovations. However, borrowers looking for more flexibility may want to consider its newer sibling, the Freddie Mac Flexible Tax-Exempt Loan. 

Freddie Mac Flexible Tax-Exempt Loans have a 3-year, interest-only floating-rate period, followed by an up to 15-year fixed-rate period, which can significantly reduce payments during a property's rehab period. Plus, underwriting criteria for Flexible Tax-Exempt Loans is based on traditional Tax-Exempt Loans, which means they offer maximum LTV allowances up to 90% of a property's market value, and DSCRs as low as 1.15x. 

To learn more, check out Freddie Mac’s official Flexible Tax-Exempt Loan Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac Flexible Tax-Exempt Loan program.

Sample Freddie Mac Terms for Flexible Tax-Exempt Loans in 2024

Size:  Varies based on LTV and DSCR requirements. 

Use:  Financing for the acquisition or refinance of stabilized affordable multifamily properties. 

Terms:  Floating-rate, interest-only loan for 3 year period (during rehab), before converting to fixed-rate, amortizing financing for the rest of the loan (up to 18 year total loan term permitted.) 

Interest Rate:  Floating-rate based on SIFMA or SOFR index 

Interest-Rate Caps:  Required for the floating-rate period of the loan 

Amortization: Up to 30 years

Maximum LTV:  85% of adjusted value or 90% of market value (based on fixed-rate Freddie Mac Tax-Exempt Loans) 

Minimum DSCR:  1.15x  (based on fixed-rate Freddie Mac Tax-Exempt Loans) 

Eligible Borrowers:  Well-qualified Targeted Affordable Housing-approved borrowers. 

Prepayment Penalty:  10-year lock out

Refinance Test: Based on the fixed-rate 

Advantages:

  • 3-year interest-only loan period reduces debt service payments during renovation (when property revenue may be significantly lower)

  • Eligible mixed-use properties supported

  • Does not change loan size or create additional proceeds

  • Deals with 4% LIHTC credits can be underwritten to 1.15x DSCR

  • Disadvantages:

    • No early rate locks or spread-locks allowed, standard delivery only

    • No supplemental loans allowed during floating-rate period

    In this article:
    1. Flexible Freddie Mac Tax-Exempt Loans for Affordable Housing Developments
    2. Sample Freddie Mac Terms for Flexible Tax-Exempt Loans in 2024
    3. Get Financing

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