후순위아파트담보대출 Apartment loan terms vary depending on the lender and property type. Banks, CMBS lenders, and agencies are the standard options for most multifamily investors.
Often short-term apartment loans are used to help renovate and reposition a property for better market performance. These loans can provide funding in as little as 10 days.
1. Interest Rate
The principal amount you’re allowed to borrow depends on the scrutiny that your lender puts on your current assets and future business prospects. In addition, your annual net operating income must cover a minimum of 1.2 times your mortgage payment (also known as the debt coverage ratio).
The lowest apartment loan rates are typically available for government-backed loans from Fannie Mae and Freddie Mac. These loans are highly regulated and take the longest to fund. However, they are also the most competitive and offer attractive terms for investors.
Other investment property financing options include bank balance sheet apartment loans. These loans don’t conform to government guidelines and can allow higher loan to value, debt to income and loan size maximums. However, they can have high interest rates and fees.
CMBS financing is another popular option for apartment building loans. These loans are securitized and sold to investors in the commercial mortgage-backed securities market through Wall Street investment banks. These investments help create liquidity 후순위아파트담보대출 in the capital markets, which can lead to lower apartment loan rates for borrowers. CMBS financing is ideal for investors who can’t qualify for agency-backed loan programs, including those with less-than-perfect credit scores. In addition, this type of financing can be used for apartment properties that are not located in a major MSA. This includes affordable, student, seniors and manufactured housing properties.
2. Amortization
As any experienced commercial real estate investor knows, the details are everything when it comes to apartment loan financing. There are many different types of multifamily loans to choose from and each one has its own set of unique terms. From interest rates to DSCR requirements, it can be overwhelming trying to figure out which type of apartment financing is right for you.
The most common types of apartment loans are HUD 223(f) loans, Fannie Mae Small Loans and Freddie Mac Small Balance Loans. These are agency loans which means they are backed by the government and have more relaxed credit standards than conventional bank loans. They also typically have shorter maturities and lower interest rates.
Another type of apartment loan is a bank balance sheet mortgage. This is a non-agency loan that is usually reserved for absentee owners or investors who don’t live in the community where the property is located. These loans have much higher down payment requirements and typically require a DSCR of 1.25 or higher.
When it comes to amortization, most people know that a portion of each monthly payment goes towards paying off the interest and a portion goes towards paying down principal. The percentage of each monthly payment that is applied to interest decreases over time as the principal balance decreases. This is why it is important to have an understanding of amortization before you get an apartment loan. Most financial calculators and spreadsheet software have an built-in amortization function that can help you calculate the monthly payments on your apartment loan.
3. Taxes
The process of getting a loan for a duplex, triplex or fourplex doesn’t differ much from that of financing a detached home. But loans for apartment buildings require “a little different underwriting, a little more of a conservative structure,” says Blake Kreutz, a commercial loan officer at County Commerce Bank in Ventura, California. Borrowers and lenders must prove that the property’s gross potential income minus expenses is enough to pay the loan. This is typically accomplished through rent rolls that detail the current tenant’s names, lease terms and occupancy rates. These documents can help identify future cash flow issues and may be required before the property closes.
4. Fees
Typically, apartment loans will require a down payment of 20% or more (though in this market realistically higher) and annual net operating income must cover the mortgage payment by at least 1.2 times or greater (this is called the Debt Coverage Ratio). In addition to these requirements borrowers are required to make a significant initial investment and often have to pay closing costs for an apartment loan.
While loan terms for multifamily properties may not differ much from those on detached homes, the underwriting process does. Unlike a home loan, where a lender looks at the applicant’s credit history and debt-to-income ratio to determine creditworthiness, lenders of apartment buildings consider the applicant’s experience owning and managing rental property. In addition, apartment building loans are considered commercial financing, so they’re a little more restrictive than residential financing.
Fannie Mae Multifamily, Freddie Mac and FHA apartment loans are the most common sources of commercial real estate funding. These loans are pooled into commercial mortgage-backed securities (CMBS), which are sliced and sold on the financial markets through Wall Street investment banks to investors seeking yield. CMBS provides liquidity in the capital markets and brings down commercial mortgage rates for borrowers. Consequently, these government-backed apartment loans typically have some of the best terms in the industry. Other private financing providers also offer these types of apartment building loans.