Sample Freddie Mac Terms for Seniors Housing Loans in 2023

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

In this article:
1. Freddie Mac-Insured Loans for Independent Living, Assisted Living, Memory Care, and Limited Skilled Nursing Properties 
2. Sample Freddie Mac Terms for Seniors Housing Loans in 2023
3. Get Financing