Maximum LTV/Minimum DSCR:

• 5-7 Year Loans:
• Amortizing: 75%/1.30x
• Partial Term Interest-Only: 75%/1.30x
• Full Term Interest-Only: 65%/1.40x
• 7 Year Loans:
• Amortizing: 80%/1.25x
• Partial Term Interest-Only: 80%/1.25x
• Full Term Interest-Only: 70%/1.30x
• 7+ Year Loans:
• Amortizing: 80%/1.25x
• Partial Term Interest-Only: 80%/1.25x
• Full Term Interest-Only: 70%1.35x

Eligible Borrowers: Current Freddie Mac borrowers with first loans currently in good standing. All other loans (both first loans and other supplemental loans), must have been originated at least 12 months ago and must have at least 3 years left on their terms.

Eligible Properties: Conventional multifamily housing, Student Housing, and Manufactured Housing Communities. Seniors Housing and Targeted Affordable Housing properties are also eligible but may have slightly different terms.

Prepayment Penalty: Yield maintenance

Timing: Loan usually take anywhere between 45 and 60 days from application to closing, depending on the timing of third-party reports and borrower due diligence

Assumability: Loans are fully assumable with lender approval and a 1% fee

Advantages:

• Provides borrowers access to additional funds at a lower cost than refinancing
• Early rate lock options available, typically between 60-120 days before purchase. Index lock and fast-track early rate lock options are also available.
• Split supplemental loans are available; these are supplemental loans placed at the same time as the original loan
• More than one supplemental loan is allowed
• Loans are fully assumable with lender approval and a 1% fee

Disadvantages:

• Requires third-party reports including Appraisal, Physical Needs Assessment, and Phase I Environmental Assessment. A Seismic Report may be also be required for properties in Seismic Zones 3 and 4.
• Servicing fee required, based on the supplemental loan amount
• Replacement reserves required
• Freddie Mac application fee of $2,000 or 0.1% of the loan amount, whichever is greater
• Typical lender application fee of $15,000 (covers third party reports and underwriting costs)
• Typically involves between $8,000 to $12,000 in legal fees
• Typically also requires an origination fee
• Typically requires 2% rate lock paid at closing (refunded when Freddie Mac purchases loan, usually around 30 days after closing)

In this article:

1. Freddie Mac Insured Supplemental Financing for Apartment Buildings and Multifamily Developments
2. Sample Freddie Mac Terms For Supplemental Loans
3. Get Financing