Freddie Mac Student Housing Value-Add Financing

Non-Recourse Loans for the Light Renovation of Student Housing Developments

In order to stay competitive in the student housing market, investors need to make sure their properties are modern, livable, and comfortable-- and sometimes, that requires a little bit of work. Investors looking to make renovations to a student housing property can rely on the Freddie Mac Student Housing Value-Add Loan. Specifically designed for student housing developments with planned repairs of between $10,000 to $25,000/unit, this loan comes with some pretty impressive terms.

Freddie Mac’s Student Housing Value-Add loan offers a loan-to-value allowance of up to 85%. There is an interest-only financing structure available for the program, and no lock-outs, creating a truly flexible loan product for any value-add project. All of these amazing terms, along with Freddie Mac’s standard non-recourse execution for both acquisitions and refinances, make the Freddie Mac Student Housing Value-Add loan an incredible financing solution when leveraged properly.

Freddie Mac Student Housing Value-Add Loan Highlights

  • Negotiable, short-term financing for renovations of $10,000 to $25,000 per unit
  • Able to meet a plethora of borrower term and structure needs
  • Up to 75% of the budget may be spent on exterior work
  • Up to a 20% variation in the budget allowed without additional approval
  • Interest-only and uncapped floating-rate loan options available
  • Eligible mixed-use properties supported

Freddie Mac Terms For Student Housing Value-Add Loan Sample Terms

Size: Varies based on LTV and DSCR requirements

Use: For the Acquisition or refinance of eligible Student Housing properties requiring moderate upgrades of $10,000 to $25,000 per unit

Terms: 3 years with one 12-month extension (borrower's request), and another optional 12-month extension (based on Freddie Mac discretion)

Interest Rates: Floating-rate interest-only loan

Interest-Rate Caps: Not required

Maximum LTV: Up to 85%

Minimum DSCR: 1.20x

Recourse: Non-recourse with standard “bad boy” carve-outs

Eligible Borrowers: Must have experience owning and operating similar Student Housing developments. Guarantors must have 1.5x the standard liquidity/net worth requirements.

Eligible Properties:

  • Properties must have no more than 250 units or 625 beds
  • Eligible properties are high-quality and only require light renovation
  • REO (real-estate owned) properties in receivership or properties performing below market averages (especially those requiring improved management) are also eligible
  • The school must have at least 15,000 minimum enrollment
  • Properties must be located within 2 miles of campus, with easy access to campus via walking or public transportation

Other Rehab Requirements:

  • Renovation must start within 90 days of origination and must be complete within 33 months
  • Planned upgrades must be between $10,000 and $25,000 per unit or $4,000 to $10,000 a bed
  • At least 25% and up to 50% of the budget can be spent on unit interiors

Refinancing Test: Not required

Assumability: Not assumable

Prepayment Penalty: The loan can be paid off at any time with a 1% penalty. No penalty if the loan is refinanced with Freddie Mac.


  • Budget can be increased up to 20% without approval
  • Up to 75% of funds can be spent on exteriors
  • Eligible mixed-use properties supported
  • No refinancing test required


  • The appraisal must include as-stabilized values
  • Replacement reserves are generally required
  • Loans are not assumable
  • Additional rehabilitation escrow or completion guaranty required
  • Application fee and good faith deposit also required

Freddie Mac Student Housing Value-Add Loan Term Breakdown

  • Three years with a single 12-month extension at the borrower’s request, and an optional 12-month extension at Freddie Mac’s discretion
  • Adjustable-rate loan with full-term interest-only; no interest rate cap required
  • No payment lockout; the borrower is allowed to pay off the loan at any time, but early repayment requires an exit fee of 1%; the exit fee is waived if the loan is refinanced through Freddie Mac
  • Acquisitions and refinances; the loan is not assumable
  • Loan documentation at origination includes the Value-Add Rider rider, which details the terms/requirements of the rehabilitation of the property
  • Escrows include taxes, insurance, replacement reserves, and Priority Repairs. A three-month debt service escrow is required during the renovation phase. Once the DSCR reaches 1.25x or higher, then the following conditions activate escrow release: Completion of 40% of the renovation work allows 50% of the escrow to be released. Completion of 80% of the renovation work allows the remaining amount of escrow may be released.
  • For longer-term ownership, there is a cash-out option available provided a completion guaranty on budgeted improvements at least equal to the cashout in place