By Eric Charbonneau, Vice President, Originations
and Michael Wade, Senior Vice President, Originations
Refinancing a commercial mortgage is one of the most powerful tools available to real estate investors—but it’s often underutilized or poorly timed. For owners of multifamily properties, including market-rate apartments, affordable housing, and mixed-use residential assets, refinancing can provide more than just better terms; it can transform your investment’s cash flow, long-term value, and overall performance.
Among the various refinancing options, HUD (U.S. Department of Housing and Urban Development) financing stands out for its long-term stability, attractive interest rates, and investor-friendly terms. By understanding how and when to refinance, and why HUD programs are uniquely suited to multifamily assets, investors can make strategic decisions that pay dividends for decades.
Why Refinance Your Multifamily Commercial Mortgage?
Refinancing involves replacing your existing mortgage with a new loan, usually to take advantage of more favorable interest rates, reduce monthly debt service, or pull out equity. In some cases, it’s also a way to transition from short-term construction into long-term permanent financing.
The primary benefits of refinancing a multifamily property include:
- Lower interest rates – Reduce your overall cost of capital.
- Eliminate balloon risk – Fully amortized loans mean no balloon payments.
- Extended amortization – Spread out payments for improved cash flow.
- Equity access – Free up funds for renovations, acquisitions, or other investments.
- Risk management – Shift from variable to fixed rates for long-term predictability.
The key is aligning your refinance with your property’s lifecycle. Ideally, this occurs with a stable property that has a solid occupancy, steady income, and operational efficiency in place.
HUD Financing: A Game-Changer for Multifamily Refinance
When it comes to refinancing stabilized multifamily properties, HUD’s FHA 223(f) program is a standout. This federally backed loan program is designed specifically to provide long-term, fixed-rate financing for existing rental housing that meets HUD’s underwriting criteria.
Here’s why so many real estate investors and developers turn to HUD for refinancing:
1. Long-Term Fixed Rates
HUD-insured loans often come with 35-year fixed terms at below-market interest rates. In a rising interest rate environment, this is a tremendous advantage. The certainty of a fixed payment for decades allows owners to plan long-term capital strategies with confidence. What’s more, these loans are flexible, and interest rates can be adjusted if they decline during the life of the loan.
2. High Loan-to-Value (LTV) Ratios
For qualified properties, HUD allows LTV ratios up to:
- 85% for market-rate housing
- 87% for affordable housing
- 90% for rental assistance (e.g., Section 8) properties
This allows borrowers to maximize leverage while retaining strong loan quality and low risk.
3. Non-Recourse Financing
HUD 223(f) loans are non-recourse loans except for minor carveouts, which means the borrower’s personal assets are protected. If the property defaults, HUD can only claim the collateral, not the borrower’s personal finances. This feature makes the program especially attractive for portfolio investors.
4. Long Amortization
With amortization periods of up to 35 years (and no balloon payments), HUD loans reduce monthly debt service, freeing up capital for operations or reinvestment.
5. Cash-Out Opportunities
If your property has appreciated or the current loan balance is low, you can often extract equity during the refinancing process, subject to HUD limitations and guidelines. These funds can be used for renovations, repositioning, or new acquisitions.
Strategic Refinancing in Action
Let’s say you developed a 120-unit apartment building with a construction loan at a higher interest rate. Now that the building is leased and stabilized, you want to secure long-term financing. HUD’s 223(f) program allows you to refinance into a fixed-rate loan for up to 35 years, potentially at a lower rate than conventional lenders offer. You might also access equity for future projects or upgrades.
Another example: You acquired a value-add property five years ago, completed renovations, and increased rents. With improved net operating income and higher asset value, refinancing through HUD lets you pull out equity, reduce your monthly payments, and lock in a fixed rate… giving you more room to grow your portfolio.
For multifamily real estate owners, refinancing is more than a financial decision; it’s a strategic move that can redefine your property’s performance and potential. HUD’s 223(f) financing offers a rare combination of stability, leverage, and affordability that’s hard to match in the commercial lending space.
Whether you’re seeking to reduce your debt service, extract capital, or transition into long-term ownership mode, mastering the art of refinancing—particularly through HUD—can help you optimize returns and build a resilient portfolio.
The Process: Patience Pays Off
The underwriting and approval process typically takes 6 to 9 months. However, experienced HUD lenders like Century Health & Housing can guide you through the process and often manage many of the details. The long-term rewards—including low interest rates, non-recourse terms, and extended amortization—are well worth the effort.