Interest Rate Subsidies
DESCRIPTION:
- Interest rate subsidies decrease interest expense to the borrower.
- The subsidies come in two forms:
- Direct cash grants to reduce a lender's interest rate; and
- Pass-through of below-market-rate funds to qualified borrowers.
FUNCTION:
- Interest rate subsidies increase project cash flow by decreasing expenses.
QUALIFICATION AND USE CRITERIA:
- Qualified projects must: create or retain jobs; create affordable housing units for low-income tenants, first time home buyers or the elderly; improve areas which qualify as low- to moderate-income; or provide other approved public benefits.
PROGRAM STRUCTURE:
- Interest rate subsidies are generally negotiated with the provider of the subsidy and are often used in conjunction with other enhancements. A common tie is with subordinated mortgages.
- Subsidies may be limited to loans or grants from non-bank sources.
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