When it comes to the acquisition or refinancing of a multifamily property, investors typically have two options: fixed-rate loans and variable-rate loans. Fixed-rate loans, like the HUD 223(f) loan , maintain the same interest rate througout the entire life of the loan product, while v
Fixed-Rate and Variable-Rate Loans and the HUD 223(f) Program
When it comes to the acquisition or refinancing of a multifamily property, investors typically have two options: fixed-rate loans and variable-rate loans. Fixed-rate loans, like the HUD 223(f) loan, maintain the same interest rate througout the entire life of the loan product. In contrast, variable-rate loans have interest rates that change throughout the loan's life. Variable-rate loans, which are also known as adjustable-rate or floating-rate loans, typically have an interest rate that's based on a specific index. Older loans were tied to LIBOR, which is no longer published: the USD panel ceased on June 30, 2023 and the remaining synthetic settings ended on September 30, 2024. Depending on the exact nature of the loan agreement, the loan then adjusts after a specific period, such as 1 month, 6 months, or 1 year.
The Benefits of Fixed-Rate Financing for Multifamily Developments
While variable-rate loans may start out with a lower interest rate than a comparable fixed-rate loan product, fixed-rate loans have many benefits in the long run. This is especially the case for multifamily investors who want to hold onto their property for a while. Perhaps most importantly, fixed-rate financing gives investors the ability to make accurate expense projections for years to come. In comparison, with variable-rate loans, investors can only determine their future interest payments within a certain range.
Related Questions
What are the benefits of a HUD 223(f) loan?
HUD 223(f) loans offer some of the best terms in the industry for the acquisition and refinancing of multifamily and apartment properties. These loans are non-recourse, offer high leverage, low interest rates, and lenient DSCR requirements.
The terms of HUD 223(f) loans are as follows:
Loan amount Terms Leverage Interest rates DSCR requirements $1 million, no set maximum Between 10 and 35 years Up to 87% LTV for market-rate properties, and 90% LTV for affordable properties and properties using rental assistance (HUD Mortgagee Letter 2025-03, January 8, 2025). Fixed for the life of the loan. Includes a mortgage insurance premium, or MIP. 1.15x for market-rate properties, and 1.11x for affordable and rental assistance properties. In addition, HUD 232/223(f) loans offer the following advantages:
- Low, fixed interest rates
- Loans are fully assumable (with FHA/HUD approval)
- HUD 232/223(f) loans are non-recourse, limiting risks for developers
What are the eligibility requirements for a HUD 223(f) loan?
Eligible Borrowers for HUD 223(f) Loans: If you're an investor or developer who wants to use a HUD 223(f) loan to acquire or refinance a multifamily property, you'll need to make sure you that your borrowing entity has the correct legal structure. In general, HUD 223(f) loans require that the borrower is a single asset, special purpose entity (SPE), which can either be a for profit or a non-profit entity.
Eligible Properties for HUD 223(f) Loans: HUD 223(f) Loans Permit Nearly All Property Types. In general, to be eligible for HUD 223(f) financing, a property:
- Must have 5+ residential units
- Must have complete kitchens and bathrooms for each unit
- Can be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing
- Can be student housing, but multiple rents cannot be derived from one unit and rents need to be similar to comparable multifamily properties
- Can be market-rate, affordable, or rental assisted/subsidized (i.e. Section 8, Section 202)
- Cannot be an assisted living, skilled nursing, or memory care property (though independent living facilities for seniors are allowed)
- Must have all construction and major rehabilitation finished three or more years before beginning the HUD loan application process
Additional Hud Requirements and Items For Consideration:
- Loans greater than $75 million are subject to stricter DSCR constraints and more conservative leverage
- HUD 223(f) multifamily financing can be used with LIHTCs (Low-Income Housing Tax Credits)
- HUD 223(f) loans can be used for refinancing or purchasing Section 202, Section 236, and Section 8 funded properties
- A PCNA (Project Capital Needs Assessment) must be completed every 10 years
- Davis-Bacon prevailing wage rules are not applicable to repairs
To learn even more about the basics of submitting a file for consideration, visit the Apply Page of our website.
What is the maximum loan amount for a HUD 223(f) loan?
HUD 223(f) loans have no maximum loan amount. However, HUD may decide to impose even more restrictive LTV and DSCR requirements for loans above $100 million in order to reduce their risk. The overall size of a HUD 223(f) loan cannot go beyond a specific per-unit limit set by HUD (and adjusted by project location).
Source Source SourceWhat is the interest rate for a HUD 223(f) loan?
The interest rate for a HUD 223(f) loan is fixed throughout the life of the loan and is determined by current rates and prevailing market conditions. For more information, please visit www.hud223f.loans/hud-223f-faqs/hud-223f-interest-rates and www.hud223f.loans/terms-qualifications-and-guidelines.
What is the repayment term for a HUD 223(f) loan?
The repayment term for a HUD 223(f) loan is 35 years. This term cannot exceed 75% of the property's remaining economic life.
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