Terms and Amortization of HUD Multifamily Construction Loans
During construction, HUD multifamily construction loans are fixed and interest only for up to 36 months. This is followed by an additional 40 years of fully amortized, fixed-rate payments. Altogether, there is a maximum term of 43 years, including construction.
In comparison, the HUD's FHA 223(f) loan, which is intended only for the purchase or refinancing of existing multifamily developments, is a 35-year fully amortized, fixed-rate loan.
How Does Amortization Affect HUD 221(d)(4) Borrowers?
Since HUD 221(d)(4) loans are fully amortizing, borrowers will never have to worry about facing a large balloon payment at the end of the loan’s term. Since many non-HUD multifamily loans are partially amortizing, it’s common for borrowers to either pay a large balloon payment, refinance the loan, or sell the property before the term of the loan is up. This is not the case with HUD 221(d)(4) loans. Instead, borrowers can hold the property until it is fully paid off.