HUD 232 Loans and Loan-to-Value Ratio
Loan-to-value ratio, or LTV, is one of the most important financial metrics that lenders look at when approving a borrower for a loan. LTVs for HUD 232 and HUD 232/223(f) loans typically vary between 75% and 85%, depending on the specific property type and borrower.
In general, lenders prefer lower LTVs, as they generally reduce the risk of a borrower defaulting. In addition, if the borrower does default, there will be a lot more equity in the property should the lender have to sell it. This makes it easier for the lender to recoup their funds. However, borrowers usually prefer higher LTVs, since they won't have to invest as much equity in a property, freeing up their cash to make other potentially profitable investments.
What's the Maximum LTV for Each Kind of HUD 232 Loan?
LTVs for HUD 232 and HUD 232/223(f) loans vary both by property type and by borrower. In general, non-profit borrowers get a slightly increased LTV limit when compared to for-profit borrowers. Maximum LTVs for different kinds of HUD 232 loans include:
Skilled Nursing Facilities/Independent Living Units: 80% LTV (for profit), 85% LTV (non-profit)
Assisted Living Facilities:
New Construction: 75% LTV (for profit), 80% (non-profit)
Purchase: 80% LTV (for profit), 85% LTV (non-profit)
Substantial Rehabilitation: 80% LTV (for profit), 85% LTV (non-profit)
For the substantial rehabilitation of HUD 232 properties, borrowers are subject to the same parameters as above (80% LTV for for-profits, 85% LTV for non-profits), or 90% of HUD eligible replacement costs (whichever is less).
For borrowers that currently own properties and are getting a HUD 232 Loan to rehabilitate them, they are limited by 100% of the existing mortgage debt or 90% of the “as is” market value of the property before rehabilitation (95% for non-profits). In comparison, borrowers who are buying properties to substantially rehabilitate them are limited by 85% of the purchase price of the property or 90% of the property's current market value before rehabilitation (95% for non profits).