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HUD 223(a)(7): Refinance Your Existing HUD Loans
Find out how HUD's fast, affordable, and simple multifamily loan can help borrowers with existing FHA-insured debt.
The Fast, Easy FHA Multifamily Loan
The HUD 223(a)(7) loan is specifically designed for refinancing existing debt on multifamily and healthcare properties backed by the Department of Housing and Urban Development. By refinancing through a 223(a)(7) loan, you can lower interest rates, extend amortization, and improve property cash flows while reducing debt service costs. HUD views this as significantly reducing the chance of loan default.
A new HUD 223(a)(7) loan can even cover prepayment penalties associated with existing debt. As a result, you don't have to wait 10 years to refinance if, for example, there is substantial downward pressure on treasury yields.
Moreover, the streamlined and affordable nature of this loan product means fewer hoops to jump through compared to a residential mortgage on a single-family home. There is no appraisal, market study, or environmental report required. The only new third-party report needed is a project capital needs assessment (PCNA).
The notable out-of-pocket cost? The HUD application fee, which is 0.3% of the loan amount due at application. Half of this is refunded after closing. 223(a)(7) loans typically close about 60 days from application. This is the fastest, easiest, and most affordable multifamily loan for investors with existing loans like the 223(f), the 221(d)(4), and other HUD-insured multifamily and healthcare loans.
Learn more by reading below, or check out our HUD 223(a)(7) loan term sheet.
HUD 223(a)(7) Highlights
Eligible Properties
Multifamily and healthcare properties with existing HUD-insured debt.
Maximum Loan Amount
No cash-out is permitted. Loans are limited to 100% of the eligible transaction costs, including the principal amount of existing debt, prepayment penalties, repairs, fees, third-party reports, and initial reserves deposit. The loan is subject to a maximum DSCR of 1.11x for for-profit entities and 1.05x for nonprofit entities. Expenses are underwritten based on the last three years of actual operating data and FHA field office estimates.
Term and Amortization
The term of the loan may be extended by up to 12 years, as long as the new term does not exceed the initial loan term — 40 years in the case of a 221(d)(4) loan and 35 years for 223(f) financing.
Recourse
All loans are non-recourse to key principals both during construction and permanent financing, subject to standard carve-outs.
Assumability
All loans are fully assumable subject to HUD approval and a fee of 0.05% of the original HUD-insured loan amount.
Prepayment Penalties
Generally, for best pricing, 10 years of call protection with a two-year lockout, followed by a step down from 8%. There is no prepayment penalty if the loan is assumed.
Timing
HUD 223(a)(7) loans typically close 60 days from application.
Third-Party Reports
Third-party reports are limited to a project capital needs assessment, which is required every 10 years.
Fees
HUD charges an application fee equal to 0.3% of the loan amount due at the time of application, half of which is refunded after closing. The balance of fees and costs are typically capped at 2.0%.