Are HUD 232 Loans Fully Amortizing?
When a loan is amortizing, it means that each payment a borrower makes is going to pay off both a portion of the interest and the principal. If a loan is fully amortizing, it means that the entire principal will have been paid off by the end of the loan term. In general, all HUD 232 loans are full
HUD 232 Loans and Amortization
When a loan is amortizing, each payment a borrower makes pays off both a portion of the interest and the principal. If a loan is fully amortizing, the entire principal will have been paid off by the end of the loan term.
In general, all HUD 232 loans are fully amortizing. Because of this, borrowers will not have to face a balloon payment (a payment of the remaining principal due at the end of an interest-only or partially amortizing loan) or be forced to refinance their loan at the end of the loan's term.
HUD 232 Construction Loans are Interest-Only During Construction
While it's true that HUD 232 loans are generally fully amortizing, HUD 232 construction loans are actually interest-only during the construction period. This is great for borrowers, as they don’t start making payments on the principal until the facility is complete and they can begin bringing in revenue.
However, when the construction period is finished, the HUD 232 loan will convert to a fully amortizing, fixed-rate loan. In this case, the entire principal will still be paid off by the end of the loan term (unless the borrower defaults or decides to refinance with a HUD 223(a)(7) loan.
Related Questions
What is a HUD 232 loan?
A HUD 232 loan is a loan program that insures lenders against mortgage defaults. It covers the construction and rehabilitation of facilities for elderly individuals requiring medical care or other long-term care, as well as the purchasing and refinancing of senior-focused healthcare properties. A HUD-Held Loan is a loan that is held by the Department of Housing and Urban Development (HUD). To learn more about HUD 232 loans, fill out the form below to speak to a HUD/FHA loan expert.
Who Can Take Out a HUD 232 Loan?
Terms, Qualifications, and Guidelines
What is a HUD-Held Loan?
Get A Free HUD/FHA Multifamily Loan Quote!What are the benefits of a HUD 232 loan?
HUD 232 portfolio loans have a variety of benefits for large-scale owners of senior properties, including:
- HUD 232 refinancing of multiple properties can greatly increase cash flow, potentially giving developers the capital to purchase or construct new assets
- HUD fixed-rate financing allows large companies to stabilize expenses and make accurate financial projections well into the future
- Low, fixed interest rates
- Loans are fully assumable (with FHA/HUD approval)
- HUD 232 loans are non-recourse, limiting risks for developers
- For purchase and refinancing, HUD offers up to a 35-year loan term and amortization. Over the life of the loan, this saves the borrowers a good deal of money and frees up cash for other expenditures.
- For new construction of healthcare facilities, only HUD offers only a 40-year, fixed-rate, non-recourse loan program.
- Loans are low interest, fixed-rate, non-recourse, fully assumable with no balloon payments.
- This program has one of the highest LTVs (loan-to-value ratio) available.
- There are no financial capacity requirements, no geographic restrictions, and no minimum population requirements.
- This assisted living financing program allows for repair and improvement funds.
- HUD 232 allows supplemental financing.
What are the eligibility requirements for a HUD 232 loan?
In order to be eligible for HUD 232 financing, properties need to meet a variety of eligibility requirements, including offering continuous care, being appropriately licensed, and having at least 20 patients. To take out a HUD 232 or HUD 232/223(f) loan, a borrower must typically have experience successfully operating one or more facilities of the same kind that they intend to build or purchase. In addition, a borrower must also be structured as a single asset, special purpose entity (SPE). Eligible borrowers may either be a for-profit or a non-profit entity.
If you would like to learn more about FHA 232 loans, you can fill out the form to speak to a HUD/FHA loan expert.
What types of properties are eligible for a HUD 232 loan?
Properties eligible for HUD 232 loans must offer continuous care and oversight for individuals requiring long-term care or medical attention, be licensed by an appropriate municipality or state body, have been completed at least three years prior (for acquisition or rehabilitation financing), accommodate 20 or more patients requiring continuous or skilled nursing care, have non-resident day care not exceeding 20% of the property’s gross area and 20% of the gross income, have independent living units not making up more than 25% of all units, and have commercial space not exceeding 20% of floor area or income.
For more information, please visit www.hud232.loan/hud-232-faqs/eligibility-requirements and www.commercialrealestate.loans/hud-232-loans.
How long is the repayment period for a HUD 232 loan?
The repayment period for a HUD 232 loan is 10 years minimum, with a maximum of 40 years for new and rehabilitated properties. This information comes from www.hud232.loan/hud-multifamily-loans.