Do HUD 232 Loans Allow for Supplemental Financing?
If you already have a HUD 232 or HUD 232/223(f) loan for an assisted living, skilled nursing, or memory care facility, can you get additional financing to make upgrades or improvements to the property? The answer is yes— and with the HUD 232/241(a) loan, it’s easier than ever.
HUD 232/241(a) Loans Provide Supplemental Financing for HUD-Insured Healthcare Facilities
If you already have a HUD 232 or HUD 232/223(f) loan for an assisted living, skilled nursing, or memory care facility, can you get additional financing to make upgrades or improvements to the property? The answer is yes. And, with the HUD 232/241(a) loan, it’s easier than ever.
What are the Terms of HUD 232/241(a) Loans?
HUD 232/241(a) loans must typically be coterminous with the original HUD 232 loan (ending at the same time.) However, borrowers may be able to get a waiver from HUD to extend the term of the HUD 232/241(a) loan to 40 years. HUD 232/241(a) loans have a maximum amount equal to the lesser of:
90% of FHA’s allowable replacement cost
90% of the market value added by the project
Amount resulting in a combined DSCR of 1.45x, (which includes the debt service on the current HUD 232 loan)
HUD 232/241(a) loans are also fully assumable, have an annual MIP of 0.72%, and can typically close within 8 weeks of initial application.
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.
What types of properties are eligible for HUD 232 financing?
Properties eligible for HUD 232 financing must offer continuous care and be appropriately licensed. They must have at least 20 patients and independent living units cannot make up more than 25% of all units. Commercial space must not exceed 10% of the gross floor area of the project and 15% of the gross project income.
For more information, please visit https://www.hud232.loan/hud-232-faqs/eligibility-requirements and https://www.commercialrealestate.loans/hud-232-loans.
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 requirements for a HUD 232 loan?
In order 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.
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.
HUD’s detailed requirements for insurance on Section 232 loans are found in Chapter 14 of the Healthcare Mortgage Insurance Program Handbook (4232.1).
Does HUD 232 financing allow for supplemental financing?
Yes, HUD 232 financing allows for supplemental financing. HUD 232/241(a) Loans Provide Supplemental Financing for HUD-Insured Healthcare Facilities. If you already have a HUD 232 or HUD 232/223(f) loan for an assisted living, skilled nursing, or memory care facility, you can get additional financing to make upgrades or improvements to the property. The HUD 232/241(a) loan makes it easier than ever.