Freddie Mac Student Housing Loans

Custom Freddie Mac-Insured Multifamily Loans for Student Housing Properties 

With millions of college students througout the U.S., there's never been a better time to invest in the student housing market, and Freddie Mac is here to help.

With Freddie Mac Student Housing Loans, investors and developers can help provide housing for the next generation of American leaders, thinkers, and doers, all while accessing LTVs of up to 80%, flexible loan terms of between five and 10 years (or up to 30 years for non-securitized, fixed-rate loans), and Freddie Mac's reliable, non-recourse loan execution. Plus, Freddie Mac Student Housing Loans also allow supplemental financing and permit early rate-lock and index-lock options in order to reduce risks for borrowers. 

Keep reading below to learn more, or click here to download our easy-to-understand Freddie Mac Student Housing Loan term sheet.

Sample Freddie Mac Terms for Student Housing Loans in 2024

Size:  $5 million to $100 million (though smaller and larger loan amounts will be considered)

Use:  Acquisition or refinance 

Terms:  5-10 years (Up to 30 years if loan not purchased for securitization)

Amortization:  Up to 30 years, interest-only loans available

Maximum LTV/Minimum DSCR:  

• 5-7 Year Loans:

  • Amortizing: 75%/1.35x

  • Partial Term Interest-Only: 75%/1.35x

  • Full Term Interest-Only: 65%/1.45x

• 7 Year Loans:

  • Amortizing: 80%/1.30x

  • Partial Term Interest-Only: 80%/1.30x

  • Full Term Interest-Only: 70%/1.40x

• 7+ Year Loans:

  • Amortizing: 80%/1.30x

  • Partial Term Interest-Only: 80%/1.30x

  • Full Term Interest-Only: 70%/1.40x

Recourse:  Non-recourse with standard “bad boy” carve-outs

Prepayment Options: Yield maintenance until securitization, 2-year lock-out period following securitization, defeasance allowed after securitization. Yield maintenance for securitized loans is permitted for an additional fee. No pre-payment premiums required in the last 90 days of the loan. 

Assumability:  Loans are assumable with lender approval, but require a 1% assumption fee paid to Freddie Mac. May also require an underwriting fee paid to the lender (typically around $5,000.)

Eligible Borrowers

• Eligible borrowers include limited partnerships, limited liability companies, corporations, or a tenancies in common (TICs) with 10 or fewer members

• In some circumstances (and with specific requirements), general partnerships, REITs, limited liability partnerships, and some trusts may also be eligible

• Typically, borrowers must be single purpose entities (SPEs), however, 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

Eligible Properties

• "Purpose-built student housing properties; must have a minimum of one bathroom for every two bedrooms, and each apartment must have a separate full kitchen"

• High-rise, mid-rise, and stabilized garden properties with a 50%+ student concentration are also eligible

• College/university must have 8,000+ students (combining students multiple schools in a close are will also be considered)

• Student housing property must be less than 2 miles from college/university or located on a public transport route

• Residence halls, buildings with shared common bathrooms, and buildings with dining halls not eligible

• Ground leases on university-owned permitted under certain circumstances (prior approval is required)

Refinancing Test: No test needed for amortizing loans with a DSCR of at least 1.40x and an LTV of less than or equal to 65%. Interest-only loans must pass a refinancing test before they are approved. 

Lease Requirements:  Generally, 12-month leases are preferred, though shorter leases may be accepted. Parental guaranty is preferred. 

Timing: Usually around 60- 75 days between application and closing

Advantages

• Very competitive interest rates

• Up to 80% LTV for some properties

• Loans are non-recourse

• Supplemental loans allowed

• Early rate-lock, fast-track early rate-lock, and index-lock options allowed

• Loans are fully assumable (with fees)

Disadvantages

• 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. Engineering Report may also be required.

• Requires annual replacement reserves of $150/bedroom or $300/unit

• Application fees required: $2,000 or 0.1% of loan amount

• Typically requires a loan origination fee

• Typically requires between $8,000 and $12,000 in legal fees

• Lender application fees also required (avg. of $15,000, including third-party reports, but may vary based on specific lender)

• 2% rate lock fee usually required (refunded after Freddie Mac purchases loan, usually around 30 days post-closing)

Case Study: Making a Value-Add Play in Gainesville

In the bustling college town of Gainesville, Florida, local real estate developer, Eagle Eye Investments, recognized a massive opportunity in the student housing market. With a burgeoning student population at the University of Florida, there was a consistent demand for affordable, safe, and conveniently located student housing. They identified a mid-rise building, less than two miles from the university, that they could convert into a state-of-the-art student housing complex.

However, the cost of acquisition and renovation was substantial. They needed a reliable financing partner who understood the student housing market and could provide them with a sizable loan on favorable terms. They found the answer in Freddie Mac’s Student Housing Loan program.

The property they wanted to purchase and renovate was valued at $8 million. With Freddie Mac’s Student Housing Loan program, Eagle Eye Investments was eligible for an 80% LTV on a 7-year loan, translating into a loan of $6.4 million.

The loan offered a competitive interest rate and a 30-year amortization period, providing the company with low, manageable monthly payments. Additionally, Freddie Mac’s non-recourse loan execution was particularly attractive, offering protection against personal liability.

Eagle Eye Investments was also drawn to the early rate-lock option that the loan program offered. This allowed them to lock in the interest rate early in the loan process, protecting them against potential rate increases before the closing date.

With the Freddie Mac Student Housing Loan, Eagle Eye Investments successfully acquired and renovated the property, turning it into a bustling student housing complex with modern amenities. Not only did the project yield a good return on investment, but it also contributed positively to the local student housing market, addressing a critical need in Gainesville's community.

This financial partnership with Freddie Mac was instrumental in making the project a success, demonstrating the immense value of the Student Housing Loan program for developers and investors in the student housing market.

This is a fictional case study provided for illustrative purposes.