Freddie Mac Seniors Housing Loans

Freddie Mac-Insured 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. 

Keep reading below to learn more, or click here to download our Freddie Mac Seniors Housing Loan term sheet.

Sample Freddie Mac Terms for Seniors Housing Loans in 2024

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