Freddie Mac Financing for Seniors Housing 

Freddie Mac Insured Fixed and Variable-Rate Loans for Independent Living, Assisted Living, Memory Care, and Limited Skilled Nursing Properties 

America's need for quality senior housing has never been greater-- and if you're an investor or developer looking to help fill that need, a Freddie Mac Seniors Housing Loan could be a great way to get financing. These loans have a wide variety of uses, permitting both the acquisition and refinancing of Independent Living (IL), Assisted Living (AL), Skilled Nursing (SN), and Memory Care properties, including facilities for Alzheimer's/Dementia patients. Freddie Mac Seniors Housing Loans offer terms of 5-10 years for variable-rate loans, and up to 30-years for fixed-rate loans, LTVs of up to 75% and DSCRs as low as 1.30x. Plus, this form of financing is non-recourse and is fully assumable with lender approval and a 1% fee. 

Sample Freddie Mac Terms For Seniors Housing Loans

Size:  

  • Varies, determined by LTV and DSCR requirements

  • Most loans are $5 million or more

Use:  Acquisition or refinance of senior housing properties 

Terms:  5-10 years (Up to 30 years for fixed-rate loans) 

Amortization:  Up to 30 years, with interest-only payment options 

Maximum LTV/Minimum DSCR:  

Independent Living Properties: 

  • 5-7 Year Loans:

    • Amortizing: 75%/1.30x

    • Partial Term Interest-Only: 70%/1.30x

    • Full Term Interest-Only: 65%/1.40x

  • 7 Year Loans:

    • Amortizing: 75%/1.30x

    • Partial Term Interest-Only: 75%/1.30x

    • Full Term Interest-Only: 65%/1.40x

  • 7+ Year Loans:

    • Amortizing: 75%/1.30x

    • Partial Term Interest-Only: 75%/1.30x

    • Full Term Interest-Only: 65%/1.40x

Assisted Living Properties (50%+ units):  

  • 5-7 Year Loans:

    • Amortizing: 70%/1.45x

    • Partial Term Interest-Only: 70%/1.45x

    • Full Term Interest-Only: 60%/1.55x

  • 7 Year Loans:

    • Amortizing: 75%/1.40x

    • Partial Term Interest-Only: 75%/1.40x

    • Full Term Interest-Only: 65%/1.50x

  • 7+ Year Loans:

    • Amortizing: 75%/1.40x

    • Partial Term Interest-Only: 75%/1.40x

    • Full Term Interest-Only: 65%/1.50x

Skilled Nursing Properties (Max. 20% of NOI):  

  • 5-7 Year Loans:

    • Amortizing: 70%/1.50x

    • Partial Term Interest-Only: 70%/1.50x

    • Full Term Interest-Only: 60%/1.65x

  • 7 Year Loans:

    • Amortizing: 75%/1.45x

    • Partial Term Interest-Only: 75%/1.45x

    • Full Term Interest-Only: 65%/1.55x

  • 7+ Year Loans:

    • Amortizing: 75%/1.45x

    • Partial Term Interest-Only: 75%/1.45x

    • Full Term Interest-Only: 65%/1.55x

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

Prepayment Options: Defeasance for fixed-rate loans. Yield maintenance also option available. Four main prepayment options are available for floating-rate loans, and prepayment premiums are waived for the final 90 days of the loan. 

Eligible Borrowers: 

  • Eligible borrowers include limited partnerships, limited liability companies, corporations, or a tenancies in common (TICs), and must typically be a special purpose entity (SPE)

  • While most borrowers must be single purpose entities (SPEs), on loans less than $5 million, borrowers may be able to be Single Asset Entities instead

  • For tenancies in common (TICs), each member needs to be a SPE, though TICs are generally not recommended

Eligible Properties: 

  • Independent living (IL) properties

  • Assisted living (AL) properties

  • Memory care properties (including Alzheimer's/Dementia care)

  • Properties with a limited amount of skilled nursing (SN), capped at maximum 20% of the property's net operating income

  • Any combination of the above

Refinancing Test: 

No Refinance Test is necessary if the loan has an LTV ratio of 55% or less and an amortizing DSCR of:

  • Independent Living: Greater than or equal to 1.45x

  • Assisted living: Greater than or equal to 1.55x

  • Skilled Nursing: Greater than or equal to 1.60x

*All partial-term interest-only loans must pass the Refinance Test

Assumability:  Loans are typically assumable with approval and a 1% fee

Timing:  Most loans typically close between 60-90 days after the pre-screening process begins. Loans may close in between 30-60 days for repeat borrowers (if using the same lender) 

Advantages:

  • Very competitive interest rates

  • Up to 75% LTV for some properties

  • Loans are non-recourse

  • Supplemental loans allowed

  • Early Rate Locks (for fixed-rate loans) are available for extended periods, including Freddie Mac’s standard early rate-lock and index lock options. Extended rate locks allow borrowers to lock rates between 45 and 365 days before closing

  • Eligible mixed-use properties permitted (Seniors Housing properties must derive no more than 20% of their Effective Gross Income from commercial uses or have more than 20% of overall square footage set aside for commercial space)

Disadvantages:

  • Requires replacement reserves

  • Requires third-party reports including Phase I Environmental Assessment, Appraisal, Physical Needs Assessment, Seismic Report may be required for properties in Seismic Zones 3 and 4

  • Seniors Liability Assessment also typically required

  • Estimated Lender Fee of $25,000 for third-party reports

  • Estimated Lender Legal fee of between $17,500 and $25,000

  • Freddie Mac Application Fee of $5,000 or 0.15% of loan amount (whichever is greater)

  • 2% rate lock fee required (refunded after closing)

  • Subordinate financing not permitted