I find this hard to swallow - 15 yr fixed at 4% with 2.25 points?

Question

I don't know, I feel pretty bad now.....

So I have a loan that matures soon and due to its commercial nature (TIC), I can't seem to find a new lender...

So the current lender offered to merge this loan onto another property that I have, and pay off the TIC loan that matures....

LTV - 70%

Mortage $700K

Term - 15 yrs fixed, 30 yr amort, with balloon payment at 15 yr

Rate 4% with 2.25 points up front...

I feel this is a 15 yr loan, with market rate at 3.5% today in open market... They are asking 4% with 2.25 points, is that too expensive?

I qualify for conventional loan from income, ratio, etc standpoints....

Jeff Lezark · Answer

@Diane G. While you may be a qualified conventional candidate from an income, asset and credit standpoint, your loan amount of $700,000 exceeds conventional limitations so you should not expect to see conforming interest rates on a non-conforming loan amount. Based on your qualifications you should be able to find a non-conforming loan at a fixed rate roughly 1/2% higher than conventional loans and no points.

Jeff B. · Answer

yes, seek other lenders.  They've got you and are seeking to expand into your other assets.

Daniel O. · Answer

You need to shop around, Talk to someone at Bank of Internet. They are doing commercial loans now and I have been very pleased with their service and rates. The worst that could happen is you will discover your bank is giving you a better deal than you realized.

David Faulkner · Answer

Why are you trying to combine them? Are you already past your 10 conforming loan limit or wouldn't otherwise qualify? Why not finance them separately? ... could then be done as 2 residential mortgages (if they are residential property) with better rates and terms, and perhaps under the jumbo loan limit for even better terms. 30 year fixed (or 15 year fixed if you prefer) conforming loan terms will be really tough to beat if you can structure them that way ...

Harjeet Bhatti · Answer

What rate you have currently on property B? Do your calculations if you merge both properties loans, will that benefit you or you keep them separate and take benefit of deductions. This scenario is not about interest rate only, key in other factors also. Ask you lender work on all the calculations not only interest rate and closing cost.

David Moore · Answer

@Diane G.

I don't think you are asking the right questions.  First, let's consider the banks point of view.  They must feel your residential property has the equity to go 700K, otherwise, they would be out of their minds to do this.  They are asking 2.25 points why?  It nets them 15K up front, but gives you 15 years fixed, at a rate for a commercial property, that is unheard of.  They think they can use that 15K, and are giving away $400.00 a month in interest for 15 years, because with no points, it has to be at least 5%.  Now, do the math.  Over 15 years, they are offering to save you $75,000.00 in interest.  Does that still sound like a bad deal?

I am sure they feel their offer is generous.  In my mind, it certainly is.  Thank them first of all for this offer.  But ask them what kind of points you would have at 4.25, 4.5....this is a loan they are holding on their books.  They have guidelines, sure, but they will negotiate.  Try to get a slightly lower rate for those points.  1/8 of a percent will net you thousands.  Try to leverage your relationship, which you won't have with other mortgage companies, to achieve a slightly better deal.  You can do this.

Diane G. · Answer

@Chris Mason

so what do you think of the offer, 4% fixed for 15 years with balloon payment at tail end... 2.25 points....$700K

Reasonable enough that I should just take it, or look around more? Shopping for loans is painful...

Chris Mason · Answer

It's commercial, so you will actually see substantial differences among lenders, because the money is not all coming from the exact same place. Shop the crap out of it, very good use of your time.

Jason Hirko · Answer

@Diane G. I guess, but that's not how a lender will talk about it. You will have a hard time comparing apples to apples. Look for rates on a 15 year fixed rate and 30 year amortization. No need to complicate it

Diane G. · Answer

@Jason Hirko

First 15 years fixed at 4% with balloon payment at end of year 15......

In a way, it is similar to ARM program, but instead of floating rates after the fixed period, it balloons.....

I find this hard to swallow - 15 yr fixed at 4% with 2.25 points?

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