When incurring debt on commercial real estate, you essentially increase two things, both your risk and your potential reward. Cash flow becomes the vehicle to minimize risk and maximize your reward. The right loan becomes the driver of margin, cash flow, and then profitability and reward. Many multifamily real estate loans have terms that include a balloon payment at the 5, 7, or 10 year mark, making it necessary to refinance or re-capitalize the underlying asset. Because multifamily property owners have many different goals and objectives, we offer a wide array of multifamily refinance options. We like to visit the property and to discuss your situation so we can recommend the best loan vehicle for your needs. To give ample time to prepare for your refinance, we recommend starting the process about a year before your current loan term is coming due. We have both “cash-out” and “cash-neutral” multifamily refinance loans available. The “cash-out” refinance options available will provide access to property equity so owners deploy that capital elsewhere if so desired.
Multifamily Refinance Programs:
- HUD/FHA 223(f) & 223(a)(7)
- Freddie Mac (FNMA)
- Fannie Mae (FHLMC)
- Life Insurance Companies
- Other/Private Sources of Capital
FHA Multifamily Refinance Lending
A FHA insured loan can be particularly compelling given the low interest rate environment we currently enjoy. FHA 223(f) loans can have up to a 35 year fixed rate amortization without any prepayment penalty after 10 years. This loan is fully assumable without a rate increase meaning your property can be passed on to your heirs or sold with the long-term financing already in place. With interest rates at historic lows, securing a low rate now can be a way to increase cash flows immediately and maximize value as rates increase over time. The FHA 223(f) program is typically the best way to take the most cash out of a property if you have significant equity. Most properties have experienced strong appreciation in the last several years as the multifamily property class has shown much strength and resiliency to changing economic climates. If you’re ready to make your next acquisition but lack all the necessary capital, this can be a way to tap into that dormant equity.
Agency Multifamily Refinance Lending
Agency (FNMA & FHLMC) multifamily capital sources offer competitive rates with a streamlined process to get you to closing quickly. This is a great option if your balloon is coming due quickly. With Fannie Mae we use the DUS (Delegated Underwriting and Servicing) Program to speed up your closing date. Our Freddie Mac offering includes a wide array of specialty loans for a variety of needs. When helping clients with a GSE loan, we will typically price out the loan with both Fannie and Freddie to get our borrowers the best rate and execution available. There is no blanket solution so we look at both to determine which will be best for our borrowers. We also have a special Freddie Mac Small Balance Loan program which caters to borrowers with loan needs in the $1 – $5 million range. This loan has lower fees than typical GSE loans and our time to fund can be in as little as 60-90 days from the start of the process.
Insurance Company Multifamily Purchase/Purchase Lending
Bonneville Multifamily Capital has developed strong relationships with Insurance Companies that offer the best multifamily loan options. These loans are typically faster to close and offer earlier rate locks than other mortgage options. Low interest rates make these loans compelling and are typically most appropriate where LTV’s 70% and lower are doable.
CMBS Multifamily Purchase/Purchase Lending
Because this is really a Wall Street product there are ups and downs to the obtainability of this type of loan. It is typically available during times when the multifamily market is strong. During those times we see aggressive terms offered to borrowers because of a strong appetite for this type of loan. It can be a really good alternative when taking cash out of a multifamily property as this type of product can offer higher LTV’s with good interest rates.
Private Capital Sources for Multifamily Purchase/Purchase Lending
Out of the box financing needs arise so we have an array of other alternatives to get your deal done. We love working on deals the others walk away from. The best way to learn more about which refinance loan makes the most sense for you is to speak with one of our experienced loan officers.