assisted living loans

Assisted Living Loans: Tailored Financing for Senior Care

February 23, 2024

Many assisted living owners and investors have experienced loan rejections from banks. Commercial Lending USA focuses on financing assisted living facilities, elder care, skilled nursing, retirement and nursing homes, memory care, adult day care, and independent living properties. We provide innovative and creative financial options, as well as a network of capital partners ready to lend. We also provide other alternatives to pick from.

The Cost of Assisted Living

The cost of assisted living can vary greatly depending on various factors, including location, type of care required, facilities supplied, and the individual facility. Assisted living is a housing option for seniors who need assistance with everyday activities but do not require the 24 hour medical care offered by a nursing home.

In the United States, assisted living costs range from a few thousand dollars to more than $6,000. This payment usually includes housing and board, support with daily responsibilities, and access to shared facilities and activities. However, there may be extra charges for unique services or increased care levels.

Factors that Affect the Cost of Assisted Living Include:

  • Geographic Location: Prices can vary greatly from one location to the next and even within the same city.

  • Size of Living Space: The size and kind of lodging, such as a studio apartment or a one-bedroom suite, might influence prices.

Residents with advanced care needs may face increased costs.

  • Facilities and Services: Facilities with additional facilities, such as exercise centers, transportation, or specialized programs, may charge more money.

  • Community Reputation: Facilities with a strong reputation for providing high-quality care and services may demand higher fees.

  • Contract and Payment Structure: Some facilities may provide all-inclusive pricing, while others may charge a basic rate plus fees for certain services.

It is critical to conduct extensive research and compare assisted living facilities to select one that meets both the individual's demands and their budget. Consider working with a financial counselor or looking into solutions such as long-term care insurance to cover the costs of assisted living.

Types of Loans Available for Assisted Living Expenses

There are several types of loans and financial resources available to help seniors meet assisted living expenses. Depending on individual circumstances, it is crucial to investigate these possibilities. Here are some popular loan and financial aid programs.

Assisted Living Loans

When utilized properly, assisted living loans provide families with a lot of freedom. Assisted living loans are intended to bridge short term financial shortages, often lasting fewer than 2 years. They are appropriate for families facing unanticipated assisted living costs while waiting for additional resources to become available.

For example, if someone is moving into assisted living and is unsure how long it would take to sell their house, a loan is an excellent alternative. Another example is when a veteran applies for the Aid and Attendance Benefit. 

The approval procedure might be long, but if approved, the benefits are paid retrospectively to the date of application in a lump payment. The lump money is then used to repay the assisted living loan.

Fannie Mae

Fannie Mae, a government-sponsored entity (GSE) dedicated to providing liquidity, stability, and affordability when financing housing in the United States, offers some of the finest loan conditions available for senior home facilities. The program encompasses almost every type of senior housing, including independent living, assisted living, and memory care facilities. Additionally, the program is accessible to continuing care retirement homes and select skilled nursing institutions. 

Fannie Mae's senior housing loan program provides five- to 30-year terms, 30-year amortizations, fixed and variable rates, and up to 75% LTV — depending on the property type — and can be utilized to purchase or refinance a purpose-built senior living facility. Most loans are non-recourse, with customary carve-outs. Fannie Mae now provides early rate locks through its Streamlined Rate Lock option to help borrowers minimize interest rate risk. 

Freddie Mac

Freddie Mac is another GSE that finances senior housing facilities. Freddie Mac loans are often given at cheaper interest rates than standard bank loans, making them a popular choice among potential borrowers. Freddie Mac's senior housing loan program, like Fannie Mae's, is intended for the purchase and refinancing of certain senior housing facilities. These facilities include independent living, assisted living, memory care, and skilled nursing units. 

Freddie Mac's senior housing loan program has adjustable-rate loan durations ranging from five to ten years and fixed-rate loan lengths of up to thirty years. Freddie Mac loans have LTVs of up to 75%, DSCRs as low as 1.30x, and are non-recourse with normal carve-outs. Fixed-rate loans can be prepaid via defeasance, but yield maintenance is also possible. 

FHA Mortgages

The Federal Housing Administration (FHA) mortgage program is a government-sponsored project that aims to make homeownership more accessible, particularly to people with low credit ratings or modest down payments. Here are the main features and components of FHA mortgages:

  1. Insured Loans

  2. Lower Down Payment

  3. Credit Requirements

  4. Interest Rates

  5. Loan Limits

  6. Mortgage Insurance Premiums (MIP)

  7. Property Eligibility

  8. Streamlined Refinancing

  9. Debt-to-Income Ratio

SBA 504 and SBA 7(a) Loans

These small company loans, which are mostly used to fund minor projects (up to $10 million), are ideal for assisted living facilities or refinancing. They can provide appealing options to borrowers since they can be extended up to 90% of the purchase price with no prepayment penalty.

You'll need strong credit and financial strength. However, if you fulfill those requirements, this loan will work well for you because it's amortized over 25 years.

There is also a three-year grace period before interest is charged on delinquent debt. Furthermore, the SBA incorporates upfront costs into the total loan amount, so you don't have to worry about getting funds before taking out the loan.

USDA Loans

The United States Department of Agriculture (USDA) provides mortgage lending programs to people in rural regions who fulfill specific income and property qualifying requirements. Here are the essential characteristics and components of USDA loans:

  1. Rural Development Guaranteed Loan Program

  2. Zero-Down Payment

  3. Income Eligibility

  4. Property Eligibility

  5. Guarantee Fee

  6. Fixed-Rate Mortgages

  7. Direct Loan Program

  8. Home Improvement Loans and Grants

  9. Eligible Borrowers

Home Equity Line of Credit

A home equity line of credit (HELOC) is another way to borrow against the equity in your house. A HELOC, like a reverse mortgage, allows you to borrow against the equity in your house without making monthly payments.

However, with a HELOC, you only borrow what you need and may make loan payments if you choose. This financial option is ideal if you simply need a small amount of money and are willing to make monthly loan installments.

Life Insurance Policy

If you no longer need your life insurance coverage, you may be able to sell it for cash. Several firms specialize in buying life insurance policies from the elderly.

A number of factors affect the amount of money you make when selling your insurance. Selling your life insurance policy is typically suggested only if you no longer require its benefits and are willing to relinquish ownership of the policy.

Long-Term Care Insurance

Long-term care insurance is another way to pay for assisted living. Long-term care insurance policies provide daily reimbursement to policyholders for eligible services such as assisted living, home care, and adult daycare. Most policies include a qualifying age (generally between 50 and 85) and a waiting period before benefits begin, which is often 60 to 90 days.

It is advisable to start looking for long-term care insurance early on. These insurances often feature age limitations and health conditions. Certain pre-existing health issues may prevent your loved one from qualifying for coverage.

Reverse Mortgage

Many seniors are now using reverse mortgages to access their home equity without having to sell completely. For long-term care, one family member must still intend to live in the home. No payments are expected until the borrower sells the house, moves out, or dies. Borrowers must be at least 62 years old, and if there is still a mortgage on the house, the cash must be utilized to pay it off first.

Seniors Housing FHA

The Federal Housing Administration (FHA) offers a variety of mortgage insurance services to help seniors secure homes, notably in senior living facilities. FHA-insured programs pertinent to elder housing include the following:

  1. Section 232 FHA Insured Loans for Residential Care Facilities:

  2. Section 223(f) FHA Insured Loans for Multifamily Housing:

  3. Home Equity Conversion Mortgage (HECM):

  4. 203(k) Rehabilitation Mortgage Insurance for Elderly Housing:

  5. Title I Property Improvement Loans for Elderly Homeowners:

  6. FHA-insured Multifamily Housing Programs

Bridge Loans

A bridge loan is a short-term loan used to fund the move to a senior living community.

Unlike a standard mortgage, a bridge loan is often paid off in one big payment. This option can help seniors who want to downsize from their present houses but don't have the money to pay for a new home and community up front.

Bridge loans can also help with health-care expenditures linked to elder living. These loans can bring much-needed financial relief to seniors who are struggling to pay for their care.

However, bridging loans often have hefty interest rates and costs. As a result, before proceeding, you must carefully assess if a bridge loan is the best option for you.

Pros and Cons of Each Loan Option

Government-Backed Loans


  • Low-Interest Rates: Government-backed loans often come with lower interest rates compared to some private loan options. 

  • Flexible Eligibility: Eligibility requirements may be more lenient, making it accessible for individuals with lower credit scores. 

  • Extended Repayment Terms: Longer repayment terms may be available, providing borrowers with manageable monthly payments.


  • Strict Eligibility Criteria: While some private loans are more flexible than others, there are still eligibility requirements that must be met. 

  • Processing Time: Government-backed loans may have a longer approval process compared to some private loans.

Personal Loans:


  • Flexible Use of Funds: Personal loans offer flexibility in how funds are used, including for assisted living expenses. 

  • Quick Approval: Personal loans often have a faster approval process compared to some government-backed loans.


  • Potentially High Interest Rates: Interest rates on personal loans can be higher, particularly for individuals with lower credit scores. 

  • Smaller Loan Amounts: The loan amount may be limited compared to other options, potentially not covering all assisted living costs.

Home Equity Loans


  • Lower Interest Rates: Home equity loans often come with lower interest rates due to the collateral being the borrower's home.

  • Larger Loan Amounts: Borrowers can often secure larger loan amounts based on the equity in their home.


  • Risk of Losing Home: Using the home as collateral means the borrower is at risk of foreclosure if unable to repay.

  • Upfront Costs: Home equity loans may come with upfront costs, such as closing fees.

Reverse Mortgages:


  • No Monthly Payments: Borrowers can access home equity without making monthly payments, providing financial relief.

  • Flexibility in Fund Usage: Funds from reverse mortgages can be used for various needs, including assisted living expenses.


  • Accruing Interest: Interest on the loan accrues over time, potentially reducing the equity in the home.

  • Age Restrictions: Reverse mortgages are typically available to individuals aged 62 and older.


In conclusion, taking out a loan to pay assisted living fees can provide essential financial assistance to elders and their families. However, the choice to take out such a loan should be made after careful study and evaluation of all available possibilities. Making an informed decision requires taking into account the long-term financial repercussions, interest rates, and repayment conditions. In addition, speaking with financial consultants or elder care professionals can give useful insights and direction. Finally, making an educated selection guarantees that the financial solution chosen is appropriate for the specific requirements and circumstances of the persons participating in the assisted living arrangement.

Sam Haq, CEO

Commercial Lending USA

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