Caffrey & Company Blog



Need 80% or greater for your apartment complex? non-recourse

Need 80% or greater for your apartment complex?  We receive a number of inquiries for apartment loans in excess of 80%.  Yes, these loans are available up to 83.3% for conventional and 87%% or 90% for project based rental assistance properties.  In addition to this higher leverage the amortization and term can be as long as 35-years for an existing property (construction period, plus 40-years for construction).   These non-recourse loans start at $1,000,000.  Due to the higher closing costs we don’t generally recommend moving forward unless the loan amount is over $3 million.  These loans are HUD FHA 223(f).  One of the pitfalls of these loans is the long lead time necessary to close the loan.  We work with HUD originators that partner with short term bridge lenders that will allow you to close the loan on a temporary basis while finalizing the loan application with HUD.   In November of 2016 the 35-year fixed rate is well below 3.80%.  Call or email Mike Caffrey (913) 402-7077 [email: mike@caffreyloans.com] for additional details and requirements for these loans. 

Program Overview: The 223(f) program is a financing program designed for acquisitions or refinancing of existing multifamily properties.  The program can be used to finance repairs or for equity take-outs.

Borrowers:   Single purpose entities that can either be profit or non-profit motivated.

Personal Liability:  None.  Loans are non-recourse.

Loan Amount:   There is no maximum loan unless limited by statutory caps.

Term:    35 year term.

Amortization:   Loan is fully amortized.

Loan-to-Value: 83.3%, 87% or 90% of the project’s value for market rate, qualified affordable or qualified rental assistance properties, respectively.

Cash Out Feature: Borrowers can do an equity take-out up to an 80% Loan-to-Value.   

Interest Rates: Interest rates are fixed at closing.  Rates are typically set lower than conventional financing due to the credit enhancement provided by FHA at closing.

Assumability:   Loans are fully assumable.

Prepayment: Terms are negotiable with no yield maintenance or achievement clauses.  Standard provisions include a short lockout period followed by a declining prepayment penalty computed as a percentage of the loan until reaching 0% after ten years. 

Mortgage Insurance   A mortgage insurance premium is paid annually based on the outstanding Premium:    principal.  Initial premium is 1% for the first year and ranges between .45% and       .60% in subsequent years depending on the project.

Commercial Space: Commercial space may be up to 20% of the project’s net rentable area and 20% of the project’s effective gross income.

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