We borrowed – and slightly amended – that classic line from Blazing Saddles, and before that, The Treasure of the Sierra Madre, to make this point. The recent increase in interest rates may have put a damper on refinancing your multifamily property – if the purpose is to simply to lower debt service – but there are other factors to consider. A refinancing, despite the current interest rate environment, still might make sense if you:
- Have a loan maturity date is that is fast approaching;
- Are chafing under restrictive or onerous loan covenants with existing debt;
- Have a need for additional funds for repairs, improvements, and capital reserves;
- Want to buy out a tax-credit investor or other partner;
- Built up equity in your property and want to monetize it; or,
- Incurred short-term bridge/construction financing to build, acquire, or add value, to a property.
Thinking differently now? HUD’s Section 223(f) mortgage insurance program for multifamily properties can provide a financing solution to all the above situations. We consider it the Swiss Army Knife of HUD-insured financing because you can use it to refinance existing debt, cash-out equity, fund repairs up to $40,000 per unit, and take out construction financing as soon as three consecutive months of debt service coverage have been achieved. And with high loan to value ratios ranging from 80% to 90%, low debt service coverage requirements from 1.11 to 1.17 and always with non-recourse provisions and up to 35-year amortizations, Section 223(f) loans provide a long-term, high leverage capital financing solution to address a variety of circumstances.
Contact us if you’re interested in learning more about Section 223(f) – or any of HUD’s other excellent financing programs.