HUD 223(a)(7): The Basics
Under Section 223(a)(7), a new mortgage term can typically be extended for up to 12 years beyond the current loan. However, the refinanced term may not extend beyond 75% of a property’s remaining useful life or beyond the maximum term permitted by the original HUD program.
Just like other FHA-insured loan programs, Section 223(a)(7) insures lenders against mortgage defaults. When a mortgage is refinanced under this program, it remains insured under the same section of the NHA, or National Housing Act, as the original mortgage.
HUD 223(a)(7) Terms
Maximum Loan Amount | Cannot exceed 100% of eligible refinancing costs |
Mortgage Terms | The existing loan term may be extended by up to 12 years without exceeding the initial loan term |
Interest | Fixed based on market conditions at rate lock |
DSCR | Maximum of 1.11x (for-profit entities) or 1.05x (nonprofit entities) |
Property Age and Condition | Subject to the terms of the original FHA-insured loan |
Audits | Annual audited financial statements are required |
HUD 223(a)(7) Benefits
The largest benefit of a HUD 223(a)(7) refinance is a reduction in debt service costs. Borrowers often stand to benefit from lower interest rates, lengthier loan terms, and longer amortization periods when using a HUD 223(a)(7) refinancing loan. These factors can greatly increase a property’s cash flows.
The application process also is faster and requires significantly less legwork compared to other HUD loans, with no market study or appraisal required.
HUD 223(a)(7) Fast Facts
Can refinance HUD-insured debt on multifamily and healthcare properties.
Can extend the original loan term by up to 12 years.
Are non-recourse and fully assumable.
Generally close within 60 days of the initial application.
Require one third-party report — a PCNA, or project capital needs assessment.
Require a partially refundable 0.3% application fee, with total fees and costs usually capped at 2.0%.
HUD 223(a)(7) Limits
Only existing FHA-insured multifamily or healthcare properties are eligible. Funds may only be used for the following:
To pay off existing FHA-insured debt
To cover refinancing costs
To cover the cost of minor or moderate repairs
To pay deposits for replacement reserves
New construction, property expansions, and major repairs are not covered by this program. A HUD 223(a)(7) refinance can also not be used for risk share, co-insured, or Section 202 mortgages. Additionally, equity take-outs are not permitted.
For more details on 223(a)(7) loans, review the program terms and qualifications and our frequently asked questions page.