For Existing HUD Borrowers: How the HUD 223a7 Loan Can Help You

MortgageEssentially, the U.S. Department of Housing and Urban Development (HUD) loan solely existed to refinance existing HUD debt exclusively on healthcare and multifamily properties. This is done to increase amortization, lower interest rates, and consequently improve the property’s cash flow, all while lowering debt service costs to lessen the risk of defaulting on the HUD loan.

The Basics of a HUD 223a7 Loan

Plenty of HUD multifamily borrowers don’t usually consider refinancing their loans since it’s fully amortizing and doesn’t come with balloon payments. However, the 223a7 loan offers borrowers an efficient, streamlined procedure that enables existing HUD borrowers to quickly reduce their interest rates on their existing HUD loans.

This new HUD load could actually absorb prepayment penalty costs — this means you won’t have to wait for 10 years for refinancing in case treasury yields are experiencing significant downward pressure. To further enhance the economical and streamlined features of the HUD 223a7 loan, you won’t have to get a market study, appraisal, or environmental report — only a project capital needs assessment or PCNA report.

More importantly, you’ll only have to pay for 0.3% of your overall loan amount for the application fee, and half of it will be refunded to you after closing. HUD loans like this normally close around 60 days starting from the application.

Cashout isn’t required, but the overall loan amount could be increased for financing closing and transaction costs, as well as improvement and repair expenses. Existing debt acquired in relation to capital renovations already done on the property could likewise be included in the overall loan amount, subject to approval by the HUD.

The HUD 223a7 loan is really the most economical, easiest, and quickest multifamily loan you could get if you’re looking to refinance. However, the loan you’re planning to refinance must be an existing loan with the HUD including the 221d4, 223f, and other HUD insured healthcare and multifamily loans.