Freddie Mac Value-Add Financing

Non-Recourse Freddie Mac Financing for the Light Renovation of Multifamily Developments

For investors and developers who are interested in financing light upgrades to a property or the acquisition of a property that they will be making light upgrades to, then Freddie Mac Value-Add financing could be an ideal option to consider. With LTV allowances of up to 85% and DSCR allowances of as low as 1.10x, the Freddie Mac Value-Add loan was specifically designed for properties with planned upgrades of between $10,000 and $25,000 per unit. The Value-add program is an excellent finance option for investors looking to boost marketability and profitability in a multifamily property, boasting an interest-only and uncapped floating-rate structure, and Freddie Mac’s standard non-recourse execution. Investors can utilize the loan for both acquisitions as well as refinances.

Sample Freddie Mac Terms For Value-Add Loans

Size: Varies based on LTV and DSCR requirements, based on 7-year sizing note rate

Use: Acquisitions and refinances

Terms: 3 years with one 12-month extension at the borrower's request, and another optional 12-month extension at Freddie Mac’s discretion.

Interest Rates: Floating-rate interest-only loan

Interest-Rate Caps: Not required

Maximum LTV: Up to 85%

Minimum DSCR: 1.10x -1.15x (depending on market)

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

Eligible Borrowers: Must have experience with the rehabilitation of multifamily properties. Guarantors must have 1.5x the standard liquidity/net worth requirements.

Eligible Properties:

  • Properties must have no more than 500 total units
  • Eligible properties are high-quality and only require moderate renovation
  • REO (real-estate owned) properties in receivership or properties performing below market averages that may be requiring improved management are also eligible
  • No Seniors Housing, Student Housing, or Manufactured Housing Communities allowed

Other Rehab Requirements:

  • Renovation must start within 90 days of origination and must be complete within a 33 month period
  • Planned upgrades must be between $10,000 and $25,000 per unit
  • 50% of the budget should 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.

Cash Equity Requirement: Typically 15%


  • Up to 85% LTV allowance
  • Budget can be increased up to 20% without approval
  • Up to 50% of funds can be spent on exteriors
  • Eligible mixed-use properties supported
  • No refinancing test required
  • The loan can be extended for one year (for borrowers in good standing) with a 0.5% extension fee
  • An additional one-year extension (with Freddie Mac permission) is available for a 1% extension fee
  • Longer-term owners can often get cash out (with a completion guaranty)


  • Requires third-party reports including Appraisal, Physical Needs Assessment, and Phase I Environmental Assessment
  • The appraisal must include as-stabilized values (underwriting needs to support a 1.30x DSCR and a 75% LTV based on as-stabilized property value)
  • Engineering review is required at loan maturity in order to ensure the quality and completion of work
  • Replacement reserves are generally required
  • Loans are not assumable
  • Additional rehabilitation escrow or completion guaranty required
  • Application fee and good faith deposit also required
  • 15% of cash equity is usually required
  • 2% rate lock fee typically required (refunded after Freddie Mac purchases loan)
  • Freddie Mac fee of $2,000 or 0.1% of the loan amount (whichever is greater) also required