Freddie Mac Moderate Rehab Financing for Multifamily Properties

Freddie Mac Insured Multifamily Loans for the Moderate Rehabilitation of Conventional Multifamily Developments

If you own a conventional property that needs significant renovations, you shouldn't have to turn to expensive construction financing to get the job done. Fortunately, with Freddie Mac Moderate Rehab Loans, you don't have to. Freddie Mac Moderate Rehab Loans offer flexible loan terms and amortizations, as well as LTV allowances up to 80% of the property's as-is value. These loans are specifically designed for conventional properties that are planning to make between $25,000 and $60,000 in renovations per unit, with at least $7,500 per unit spent on interior improvements. That means investors and developers can put a new spin on an old property, all while enjoying the ease, certainly and affordability of the Freddie Mac Multifamily loan process. 

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

Sample Freddie Mac Terms For Moderate Rehab Conventional Loans 2021

Size:  Varies, based on LTV and DSCR requirements 

Use:  Moderate rehabilitation of conventional multifamily properties 

Terms:  Varies, typically float-to-fixed-rate structure. Various combinations of floating and fixed-rate structures can be considered on an individual basis. Loans are interest-only during rehabilitation. 

Interest-Rate Cap: Required if the loan is not converted to fixed-rate. 

Amortization:  Varies 

Maximum LTV

  • 80% of as-is value (supported by acquisition price, if a recent acquisition)

  • Unfunded loan proceeds are periodically drawn to reimburse sponsor for up to 80% of the renovation costs on a monthly or quarterly basis, as work is finished (just like construction financing)

  • Appraisal needs to demonstrate 80% as improved LTV (with fully funded renovation proceeds)

Minimum DSCR:  

  • 1.20x interest-only “as-is”

  • As improved underwritten net operating income per appraisal must reflect at least a 1.30x amortizing DSCR (and will be subject to appraisal support)

Recourse:  Non-recourse with standard “bad boy” carve-outs

Prepayment Options:  2% prepayment penalty during rehab period; standard Freddie Mac prepay structures available thereafter

Seller/Servicers:  Must be approved by Freddie Mac for conventional loans

Eligible Borrowers:  Borrowers should be well-funded and experienced in the successful completion of similar rehab projects. 

Eligible Properties: 

  • Conventional properties planning between $25,000 and $60,000 in repairs/renovations per unit, with at least $7,500 per unit designated for interior work

  • Property DSCR must not go below 1.0x during the rehab process

  • Seniors housing, student housing, manufactured housing communities, mezzanine financing, and preferred equity with hard pay are not eligible

Rehab Timeline:  All rehabilitation work must be complete within 36 months. 

Periodic Draws: 

  • Draws will be executed monthly or quarterly

  • First draw requires certificate from servicer provided to Freddie Mac to confirm that request is consistent with the loan agreement

  • Future draws also require certification/independent confirmation by Freddie Mac

  • 5% of draws are retained and will be released when all construction work is finished


  • Very competitive interest rates

  • Up to 80% LTV for some properties

  • Loans are interest-only during rehab


  • Requires additional documentation including: Freddie Mac Disbursement Agreement, Disbursement Servicing Agreement, Operating Deficit Agreement & Completion Guaranty for 80% of approved budget and all work initiated, construction scope, budget and schedule

  • Requires a Property Condition Report, which needs to provide an opinion on whether the construction plan can be completed within the set budget and schedule

  • Monitoring is required, involving quarterly progress reports and inspections of rent rolls and operating statements