What are Replacement Reserves?

Replacement Reserves in Relation to FHA 232 Financing

Replacement reserves are funds that are earmarked for replacing building components and equipment which will wear out over time. HUD 232 loans typically require replacement reserves of $1,000/unit per year in years 1-15 (HUD 232/223(f) loans), and years 2-15 (HUD 232 construction/substantial rehabilitation loans.)

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