Conventional Multifamily Rates
Thursday, April 22, 2010 -
LouisJ - Louis Jeffries -
The rates charged to finance a multifamily property varies based on similar yet different criteria than a residential mortgage. All mortgage rates vary based on the financial markets but the LTV, Credit, Income, Type of property, loan amounts and terms are all contributing factors for both a Residential or Commercial mortgage but the factors are different in both cases.
Commercial Multifamily Rate Factors Conventional:
- LTV: The maximum Loan to Value for most agency loans is 70 to 75% with some programs going up to 80% and there will be slight rate savings for lower LTV properties. The borrower may save as much as 25 or 30 basis points for a LTVs below 55%
- Credit: The minimum credit score for an agency loan is 680 with compensating factors some agency loans will get done with 620 minimum credit scores.
- Income: The income is based on the property income and it is expressed as a ratio of gross operating income to the expenses of the property. The ratio of course should be positive (greater than 1:20 as a minimum) and the higher (1.50 or better) it is the better the rate will be. The income is looked at with the LTV and if the LTV is low and the DSCR is high then the borrower gets the better rate. If LTV is high or DSCR is low there is no discount in the rate.
- Type of Property: Because Multifamily real estate has the least risk of all commercial mortgages the rates are the best. Therefore the type of property for our sake is equal because they are all Multifamily 5+ Units.
- Loan Amounts: For Commercial Multifamily Mortgages The higher the loans the lower the rates.
- Terms: Because Commercial loans are usually made by commercial banks with a limited secondary market, most commercial mortgages have short term rates and the rates are much higher for longer terms. The typical terms are amortized over 20 to 25 years with balloons or adjustments due in 5,7, or 10 years. There are shorter and longer terms but these are typical. The long term fixed rates are as much as 200 basis points higher.
Now that there is a general understanding of how rates are determined these are the Commercial Multifamily rates for April 22, 2005
5 Year Fixed Balloon: From 4.88 to 5.55
7 Year Fixed Balloon: From 5.40 to 6.10
10 Year Fixed Balloon: From 5.76 to 6.56
Terms are based on the variables outlined above. Rates and terms are subject to change without notice.
If your property does not qualify for the requirements of these conventional loans then there are other options including portfolio loans, bank soft money loans, and hard money bridge loans.
Long term fixed and government programs are also available.
GSF Mortgage Corporation
Cape Coral, FL
Clifton Park, NY
Equity Mortgage Lending
Owings Mills, MD