Freddie Mac Green Advantage
The Freddie Mac Green Advantage Program allows higher LTVs and lower DSCRs for borrowers who can demonstrate a 25% reduction in water/sewer consumption. To qualify, borrowers must get a Green Assessment from an approved third-party organization.
Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get QuotesFreddie Mac Loan Incentives for Resource-Efficient Multifamily Developments
Today, many multifamily investors are finding that by reducing their resource use, they can also save money, and, with Freddie Mac's Green Advantage program also offering significant financial incentives, it's never been a better time to go green.
Freddie Mac's main Green Advantage incentive programs include Green Up and Green Up Plus, each of which offers increased LTV allowances and reduced DSCR requirements to properties that can demonstrate a 30% reduction in water/sewer and energy consumption (at least 15% of which must come from energy consumption).
In order to demonstrate that reduction, Freddie Mac borrowers will need to get a Green Assessment, the cost of which (up to $3,500) is reimbursed by Freddie Mac at loan closing. However, properties that have gotten other kinds of green certifications, including certain ENERGY STAR, Green Globes, and EarthCraft certifications, and have at least 20% affordable units are also eligible for the Green Advantage program.
Keep reading below to learn more, or click here to download our easy-to-understand Freddie Mac Green Advantage Loan term sheet.
Sample Freddie Mac Terms for Green Advantage Financing in 2023
Minimum Projected Consumption Reduction: 30% of energy or water/sewer consumption based on Green Assessment or Green Assessment Plus, with a minimum of 15% from energy
As Is: -0.05x DSCR reduction, subject to 1.20x or product limit. +5% LTV subject to greater of 85% or project limit.
As-Improved: "Must meet policy compliant DSCR/LTV." Amounts based on as-improved NOI/appraised value.
Timeline: Borrowers have two years to complete improvements
Escrow: Funds for energy/water efficiency work will be escrowed at 125% of cost and released as work is completed
Benchmarking Data Requirement: Green Advantage loans require borrowers to hire a third-party data collection consultant, before loan origination, to collect, input and monitor actual energy and water usage through the loan’s term.
Other Eligible Green Certifications:
If your property has at least 20% affordable units and is already certified under one off the below programs, it may also qualify for discounted loan pricing:
EarthCraft, Greater Atlanta Home Builders Association & South Face
ENERGY STAR® for Multifamily, EPA
ENERGY STAR® for Qualified Multifamily High-Rise, EPA
Green Communities, Enterprise Community Partners
Green Globes, Green Building Initiative
GreenPoint Rated, Build It Green
LEED, US Green Building Council
National Green Building Standard (NGBS), Home Innovation Research Labs
Green Rebate: Even without using any of the Green Advantage options mentioned above, eligible borrowers (those with properties with 20+ units) can still get a $5000 green rebate from Freddie Mac for getting an EPA ENERGY STAR Score®
C-PACE: Commercial PACE financing may be available upon request
Advantages:
Allows for increased LTVs and decreased DSCR requirements
Eligible mixed-use properties supported
Disadvantages:
Green Assessment required
Property energy and water usage need to be recorded in an EPA Portfolio Manager for the calendar years up to the fourth year of the loan