Can You Refinance an Existing HUD 223(f) Loan?
Refinancing An Existing HUD 223(f) Loan
If you've been reading this site, you might already know that HUD 223(f) loans can be used to refinance multifamily properties. But what if you already own a property being financed with a HUD 223(f) loan? And, what if you want to refinance to get a better interest rate or reduce your monthly payments?
Well, HUD has a solution for you in the form of a HUD 223(a)(7) refinance. HUD 223(a)(7) refinancing is specifically designed to refinance current HUD multifamily loans, including HUD 223(f) loans. HUD 223(a)(7) refinancing can reduce interest rates, increase amortizations, and increase property cash flows. In the end, it reduces the risk for HUD that a borrower will end up defaulting on their mortgage.
What Are The Terms of HUD 223(a)(7) Refinancing?
Basic terms for HUD 223(a)(7) refinancing include:
Terms and Amortization: Loan terms can be extended by 12 years, but new loan term cannot exceed original loan term (35 years for HUD 223(f) loans)
Recourse: Just like HUD 223(f) loans, HUD 223(a)(7) loans are non-recourse with standard bad boy carve outs
Assumability: Fully assumable with FHA approval and 0.05% fee
Fees/Costs: Usually capped at 2%
Timing: HUD 223(a)(7) loans typically close in 60 days
In addition to being non-recourse and fully assumable, HUD 223(a)(7) loans do not require time consuming third-party reports like Market Studies or Environmental Assessments. In fact, they only require one report, a Project Capital Needs Assessment (PCNA.) Plus, HUD 223(a)(7) loans can also absorb the cost of any prepayment penalties. This makes them an incredibly useful and versatile tool for existing HUD multifamily borrowers.