HUD 232 vs Bank Financing for Senior Care: How to Choose
By Trevor Damyan, Commercial Mortgage Broker at Commercial Lending Solutions
Senior care financing (independent living, assisted living, memory care, skilled nursing facilities) operates in a specialized capital market dominated by HUD 232 and a narrow bench of healthcare-focused banks. HUD 232 provides 35-year fully amortizing fixed-rate financing at up to 80 percent LTV (acquisition) or 90 percent LTV (substantial rehab and new construction), with the trade-off of an 18 to 24 month underwriting timeline. Bank balance sheet provides faster execution at lower leverage. The decision depends on hold horizon, project type, and sponsor patience.
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Rate ranges reflect indicative pricing as of June 2026, sourced from active CLS CRE quote pipeline. Pricing is property, sponsor, and structure dependent.
When HUD 232 Is the Right Call
HUD 232 wins on long-term hold strategies for stabilized senior care, on substantial rehab and ground-up construction where 90 percent LTC is meaningful, and on sponsors willing to invest 12 to 24 months in HUD underwriting in exchange for the lowest cost of capital fully amortizing structure available in senior care.
- Long-term hold horizon (15 to 35 years) where 35-year fully amortizing is meaningful
- Stabilized senior care acquisition or refinance where 80 percent LTV is helpful
- Substantial rehabilitation or new construction where 90 percent LTC is meaningful
- Sponsor has 18 to 24 months patience for HUD timeline
- Project size $5M to $50M+ where HUD 232 execution scales efficiently
- Davis-Bacon prevailing wage compatible (or not applicable for non-construction)
When Bank Balance Sheet Is the Right Call
Bank balance sheet wins on speed-to-close, on smaller transactions, and on situations where the HUD timeline is impractical. Bank execution is the standard for opportunistic acquisitions, distressed senior care turnarounds, and sponsors needing financing within 90 days.
- Acquisition with a 60 to 90 day close requirement
- Smaller deal size $3M to $10M where bank balance sheet is competitive
- Sponsor wants flexibility to refinance to HUD or other permanent at stabilization
- Distressed or transitional senior care turnaround where HUD process is incompatible
- Sponsor with strong depository relationship that delivers competitive bank pricing
- Davis-Bacon prevailing wage not feasible for new construction
How to Choose Between HUD 232 and Bank Balance Sheet
Start with timeline. HUD 232 requires 12 to 24 months from initial application to close. Bank balance sheet closes in 60 to 90 days. If the deal needs financing in 90 days, HUD is structurally infeasible regardless of other considerations.
Run the cost-of-capital math. HUD 232 provides 35-year fully amortizing fixed at 5.95 to 6.45 percent. Bank balance sheet at 7.75 to 9.00 percent over 5-year term plus refinance at year 5 totals materially higher capital cost over a 20-year horizon. The crossover favors HUD on long holds.
Evaluate hold horizon. HUD 232's 35-year amortization locks in cost of capital across multiple economic cycles. Sponsors planning 5 to 7 year holds get less benefit. Sponsors planning multi-decade family or institutional ownership get the most benefit.
Consider Davis-Bacon (new construction). HUD 232 ground-up requires Davis-Bacon prevailing wage adding 8 to 18 percent to construction labor cost. Bank construction does not. Sponsors who can absorb Davis-Bacon (mission-aligned, public-private partnership) accept it; sponsors who cannot use bank construction.
A Real Decision in Action
On a $24M assisted living facility refinance with the sponsor as a mid-market senior care operator with 8 facilities under management, the existing 7-year bank balance sheet loan was maturing with $1.4M of yield maintenance exposure. HUD 232 quoted at 6.15 percent fixed 35-year fully amortizing at 80 percent LTV ($19.2M loan), with a 14-month underwriting timeline. The bank quoted a refinance at 7.85 percent fixed 7-year at 65 percent LTV ($15.6M loan) with full sponsor recourse. The sponsor selected HUD 232 because the 35-year fully amortizing structure aligned with the family's multi-decade ownership intent, the 80 percent LTV versus 65 percent freed up $3.6M of capital, and the rate was 170 basis points inside bank. The 14-month HUD timeline was acceptable because the maturing bank loan had extension flexibility through HUD close.
All deal references anonymize borrower and lender identities and use city-level geography only.
HUD 232 is one of the most powerful long-term financing tools in senior care. The trade-off is the 12 to 24 month timeline, which makes it impractical for opportunistic deals. For sponsors with patient capital and long hold horizons, HUD 232 is hard to beat on cost.
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