12/27/2018

Seniors Housing and Assisted Living Loan Programs

What loans are available for assisted living and seniors housing facility purchases, refinances, construction, or bridge in 2021?


  • SBA 504
  • SBA 7(a)
  • HUD 232
  • HUD/FHA 223(a)7 Refinance
  • USDA B & I
  • Fannie Mae
  • Freddie Mac
  • Cash-out refinance
  • Multifamily loans
  • Bridge loans
  • Construction Loans
  • Private Equity
  • C-PACE Financing

Seniors Housing and Assisted Living Facility Acquisition and Refinancing Financing

Haven Senior Investments has a wealth of experience in senior housing and assisted living business purchase, new development, and refinance loans.

Seniors Housing and Assisted Living Facility Recapitalization and Refinancing

Refinancing your current debt can help reduce your organization’s operating cost, improve your cash flow, or meet other objectives. In addition, refinancing can remove burdensome or restrictive covenants imposed by the terms of the outstanding debt. HSI’s experience encompasses a variety of agency structures.

Seniors Housing and Assisted Living Facility Non-Recourse Financing

HSI provides our clients with numerous financing options, such as access to non-conventional loans with government enhancement programs that can lower the cost of capital and provide non-recourse features. Our finance professionals originate mortgage loans insured or guaranteed by governmental agencies and sponsored enterprises, including the Federal Housing Administration (FHA), the Government National Mortgage Association (GNMA), the United States Department of Agriculture (USDA), and Fannie Mae.

Seniors Housing and Assisted Living Facility New Construction or Substantial Rehabilitation

HSI has extensive experience structuring and originating construction loans and financing for renovation and rehabilitation projects. Access to these allows us the flexibility to multi-track government agency financing options, which means we can change financing structures to take advantage of lower interest rates and/or more favorable terms and conditions.


Fannie Mae Seniors Housing and Assisted Living Facility Loan Program Overview

The Fannie Mae Seniors Housing Loan program provides mortgages for existing, stabilized, purpose-built Seniors Housing properties that provide Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or any combination or standalone.

  • Prefer loan sizes above $2 million
  • Up to 75% LTV
  • Fixed-rate terms up to 30 years
  • Non-recourse
  • Assumable
  • Available for experienced operators

Freddie Mac Seniors Housing, Assisted Living & Multifamily Small Balance Loan Program

The Freddie Mac Multi-Family Loan Program fills a gap in the small senior housing loan space ($1MM-$7.5MM) for borrowers seeking competitively priced, non-recourse debt without yield maintenance, or a balloon payment at the end of the fixed term. The Small Loan Program helps to maximize your property’s cash flow with low rates, interest-only payment options, no replacement reserves, and up to 30-year amortization.

  • Loan amounts from $1M to $7.5M
  • Highly competitive interest rates
  • Interest rate locked at application
  • Partial and full-term interest-only available
  • Yield maintenance or declining prepay options
  • No replacement reserve requirements
  • Non-recourse
  • Assumable
  • Available nationwide
  • Up to 80% LTV
  • 30-year amortization
  • 5, 7 and 10 year fixed rate options available
  • Converts to ARM at the end of the fixed term
  • No underwriting floor rate maximizes proceeds
  • Cash-out to 80% in Top and Standard Markets
  • Tax returns not required

HUD FHA Section 232 – Commercial Loans for the Acquisition of Multi-Family, Seniors Housing and Assisted Living Properties

HUD provides commercial loans for assisted living, skilled nursing, intermediate care, memory care, and other residential care facilities through Section 232. FHA-insured mortgages are available for the purchase or refinancing of residential care facilities with a stabilized operating history. Facilities currently financed with an FHA-insured healthcare mortgage are eligible for streamlined refinancing through the FHA 223(a)(7) LEAN program.

  • Up to 80% leverage
  • Up to 100% of transaction costs for refinance
  • Non-recourse and assumable
  • Up to 35-year fixed-rate term
  • Property types include assisted living, memory care, skilled nursing, intermediate care

HUD 223 Refinance Calculator for Multi-Family, Senior Housing, Assisted Living, and Healthcare Properties

Assisted Living Construction Loan

Section 232 of HUD’s mortgage insurance programs allow for the insurance of mortgages for the construction or substantial rehabilitation of senior housing communities including assisted living facilities, skilled nursing, memory care, and so on. 232 Loans are generally up to 35 years fixed and fully amortizing.

  • Up to 80% leverage for profit-motivated sponsors (85% for non-profit)
  • 1.45x minimum debt service coverage ratio
  • Up to 35 years fixed and fully amortizing
  • Assumable subject to HUD approval 
  • Extremely competitive pricing

Independent Living Construction Loan

If you’re considering getting an FHA multifamily construction loan to build an age-restricted or senior community, it’s important to understand what this type of loan does and does not allow. According to HUD, a senior community is any community for individuals 62 years and older. 

The main limitation of HUD 221(d)(4) loans for senior living projects is that they must not be assisted living. This means that communal dining facilities are not allowed. So, for instance, this loan does not fund traditional nursing homes. Instead, it only funds “independent living facilities,” where seniors live independently in apartments, generally without any supervision from the project itself. A meal service may or may not be offered, or, it may be offered by an independently contracted company. Instead of using the 221(d)(4) loan, some developers decide to use the Section 231 program to help fund senior developments. However, this program has become much less popular in recent years in favor of FHA 221(d)(4) financing.  


Obtaining HUD, Freddie, and Fannie, USDA non-recourse financing for Seniors Housing and Assisted Living Properties can take longer (3 months to a year) than conventional loans but the benefits often outweigh the delay factor. Please contact us if these loans interest you and we will guide you through the process.


SBA 504 & SBA 7a for Seniors Housing and Assisted Living Facilities and Businesses Purchases

The SBA 7a and 504 loan programs are well suited for Assisted Living Facility acquisition financing or refinancing. These loan products often offer attractive choices for borrowers as loans may be granted up to 90% of the purchase price. The actual amount loaned will depend on the creditworthiness of the borrower and the financial strength of the business. These loans amortize over 25 years and usually come with a 3-year prepayment penalty. They are typically used for smaller projects as the loans are often capped at $10 million. (regulatory changes will cause this to fluctuate)  SBA will also allow the upfront fees to be included in the general loan amount.


USDA B&I for Seniors Housing and Assisted Living Facility Financing

The USDA Business and Industry (or B & I) program offered by the Department of Agriculture is also a good option for financing and constructing Assisted Living and Senior Care facilities in rural and semi-rural areas. The primary qualification for these loans is the location. The facility must be located within the USDA’s rural jurisdiction.


C-PACE Financing for Senior Housing Properties and New Developments

Property Assessed Clean Energy (PACE) is a financing mechanism that enables low-cost, long-term funding for energy efficiency, renewable energy and water conservation projects. PACE financing is repaid as an assessment on the property’s regular tax bill, which generates benefits that aren’t available through conventional forms of funding.


Final Considerations

In addition to strong personal credit, the lender will be interested in the following elements when examining a loan request for senior housing.

  1. Positive Trend.  Nothing scares lenders more than negative sales and earnings trends in a business or its industry. Conversely, a pronounced positive trend is a thing of beauty to a lender. They may look back several years to see how the business performed through past economic cycles.
  2. Business Plan.  Buyers are required to submit a basic business plan for the senior care business they are acquiring. Lenders want to see an intimate understanding of the business and industry. In most cases, a plan calling for modest growth and incremental change is the safest bet.
  3. Continuity.  Commitments by existing managers, key personnel, suppliers and customers to continue with the new owner represent a reduced risk to a lender.
  4. Seller Training.  Lenders want to see a well-thought-out management transition plan. A training/transition period to the new owner could be anywhere from 1 to 12 months. Be sure to negotiate this point upfront and clearly spell it out in the purchase agreement.
  5. Seller Financing.  When a seller agrees to finance even 10-15% of the deal, (subordinated to the banknote) it shows the lender that the seller is confident in the business under the new buyer’s leadership and it shows commitment from the seller to make the transition work. This condition is commonly imposed by lenders.

Whether you are looking to purchase or refinance an independent or assisted living facility or business, develop a new senior housing facility, or expand your current senior housing business, loans are readily available. Let us guide you through the process and help position you for successful loan approval. Schedule some time with us or fill out the form below.



Assisted Living and Senior Housing Facilities For Sale

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