Apartment loans products are very different from residential. Loan amount, occupancy rate, debt service, the break down of units, city and state, population, the quality of the property, if you live in the same state as the property, your experience, your credit and credit scores, how much you have in liquid assets for down payment, closing cost and reserves and your networth are a few of the things that will impact the rate and term.
Commercial terms for a property that debt services a mortgage that has a 90% occupancy will typically have either a 5 year fixed with a 20-year amortization or a 5-year fix up to a 30-year amortization. In the old days the loan ballooned after the 5-year fixed period. Today, many of them will either reset or most likely go to a hybrid. Hybrid also known as in the residential arena is called an adjustable rate. Also today, there are 5- year fix, 7- year fix, 10-year with amortization up to 30 years or a 15-year fix with a 15-year amortization. Be aware that in the commercial lending space you will have a pre-payment penalty for typically the length of the fixed period. Rates can range between the low 4’s (agency for loan amounts above $1MM and in major metropolitan areas) up to maybe the low 7’s for 5-year fix on the products above.
There are 30 year fixed products typically on agency money which means the loan amount must be $1MM and above. The 30 year fix product will have a yield maintenance prepayment penalty, which is a nasty prepayment penalty, so many investors do not utilize the 30-year product.
The products that do not have pre-payment penalty loans are shorter-term loans that are known as a bridge. The rate can be fixed for 1-year, 2-year or 3-year with typically an interest-only payment or a 30-year amortization. The reason people utilize the short term product is if they need to close in 30 days or less, they need to stabilize the property, they plan to flip the property, they can not season and source their down payment, the loan is below a $1MM and they need a syndication deal, or their credit does not meet commercial standards etc. Today, many bridge product rates are in the 7 to 9’s.
Hard money loan rates are typically in the 10 to 12% range.
Commercial loan products for apartments can go up to 80% loan to value for the longer fixed terms and some of the short term/bridge products. The only way to get the 80% for the short term/bridge product is if the borrower’s creditworthiness is exceptional, debt services and not needing a syndication deal.
The best way to get an idea of the rate and term for the property you are interested in, and at the same time get pre-qualified so you can pull the trigger, would be to submit the Realtors flyer that will include the address, pictures, break down of units, P&l or 12T and rent roll along with your application, credit report with credit scores and bank statements to show you have the funds for the down payment, closing cost and reserves.
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