HUD 223(a)(7) Loans, a Janover property
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Fixed-rate, non-recourse refinancing for HUD multifamily borrowers: extend your term up to 12 years, no market study or appraisal required, with the industry's fastest HUD execution.
HUD 223(a)(7): Fixed-Rate, Non-Recourse Refinancing for HUD Multifamily Borrowers
Navigating HUD multifamily and HUD healthcare financing programs without prior experience can be difficult. Even many people with significant experience find it challenging. Welcome to HUD 223(a)(7) Loan, your comprehensive guide to HUD 223(a)(7) refinancing. The 223(a)(7) loan is designed specifically to refinance certain, existing HUD-insured mortgages from HUD-approved lenders.
Read on to learn the program's main benefits, along with some fast facts and guidelines, and read our HUD 223(a)(7) loan term sheet.
HUD 223(a)(7): The Basics
Under Section 223(a)(7), a new mortgage term can typically be extended for up to 12 years beyond the current loan. However, the refinanced term may not extend beyond 75% of a property's remaining useful life or beyond the maximum term permitted by the original HUD program. Just like other FHA-insured loan programs, Section 223(a)(7) insures lenders against mortgage defaults. When a mortgage is refinanced under this program, it remains insured under the same section of the NHA, or National Housing Act, as the original mortgage.
HUD 223(a)(7) Fast Facts: Can refinance HUD-insured debt on multifamily and healthcare properties. Can extend the original loan term by up to 12 years. Are non-recourse and fully assumable. Generally close within 60 days of the initial application. Require one third-party report: a PCNA, or project capital needs assessment. Require a partially refundable 0.3% application fee, with total fees and costs usually capped at 2.0%.
HUD 223(a)(7) Limits: Only existing FHA-insured multifamily or healthcare properties are eligible. Funds may only be used to pay off existing FHA-insured debt, to cover refinancing costs, to cover the cost of minor or moderate repairs, or to pay deposits for replacement reserves. New construction, property expansions, and major repairs are not covered by this program. A HUD 223(a)(7) refinance can also not be used for risk share, co-insured, or Section 202 mortgages. Additionally, equity take-outs are not permitted.
For more details on 223(a)(7) loans, review the program terms and qualifications and our frequently asked questions page.
HUD 223(a)(7) terms
Terms, fast facts, and limits.
HUD 223(a)(7) Terms
- Maximum Loan Amount: Cannot exceed 100% of eligible refinancing costs
- Mortgage Terms: The existing loan term may be extended by up to 12 years without exceeding the initial loan term
- Interest: Fixed based on market conditions at rate lock
- DSCR: Maximum of 1.11x (for-profit entities) or 1.05x (nonprofit entities)
- Property Age and Condition: Subject to the terms of the original FHA-insured loan
- Audits: Annual audited financial statements are required
HUD 223(a)(7) Benefits
- The largest benefit of a HUD 223(a)(7) refinance is a reduction in debt service costs
- Lower interest rates, lengthier loan terms, and longer amortization periods can greatly increase a property's cash flows
- The application process is faster and requires significantly less legwork than other HUD loans, with no market study or appraisal required
HUD 223(a)(7) Limits
- Only existing FHA-insured multifamily or healthcare properties are eligible
- The refinanced term may not exceed 75% of the property's remaining useful life or the original program's maximum term
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From the FAQs
Latest from the HUD 223(a)(7) desk.
Nov 30, 2018
Do HUD 223(a)(7) Loans Allow Prepayment?
Yes, HUD 223(a)(7) loans typically allow prepayment. However, there is often a 0-2 year lockout period, during which the loan cannot be prepaid at all, followed by an 8-10% declining prepayment penalty. This means that the prepayment penalty will decline by 1% each year, starting after the lockout period ends.
Nov 26, 2018
Are HUD 223(a)(7) Loans Assumable?
Just like other HUD multifamily loans, HUD 223(a)(7) loans are fully assumable subject to FHA approval and a fee of 0.05% of the original FHA-insured loan amount. The fact that these loans are assumable can be a significant benefit to borrowers; especially those who want to sell their property after a few years. This is because having a new borrower assume the loan prevents the previous borrower from having to pay a prepayment penalty.
Nov 26, 2018
How Long Does it Take a HUD 223(a)(7) Loan to Close?
Because there are fewer requirements for the HUD 223(a)(7) refinance program, these loans typically close about 60 days after the application is submitted.
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