Apartment Complex Financing

[Derek Morrison]

What kind of banks finance apartment building investments (if any)? If any do, what's a good estimate for closing fees as a percentage of purchase price, and what's a typical interest rate?

[Amy Heitner]

Hey Derek,

There are different types of loan programs. It’s important to become familiar with them so you make the best choice for yourself. Here are some highlights of some multifamily loan programs that have great rates.

Fannie Mae Loan Program

• Loan to value of 80% is the maximum if purchase or refi has no cash-out
• Loan to value of 75% is the maximum if refi has cash out.
• 30 years amortization
• Rate is fixed for a range of 5 years to 30 years.
• $750,000 is the minimum loan size, and size of loan is limitless.
• If approved, loan can be assumed for a fee of 1%

Freddie Mac Loan Program

• Rate is fixed for a range of 5 years to 30 years.
• Loan to value of 80% is the maximum if purchase or refi has no cash-out
• Loan to value of 75% is the maximum if refi has cash out.
• $1,000,000 is the minimum loan size, and size of loan is limitless.
• 30 years amortization

Commercial Mortgage Backed Security (CMBS) Loan

• $2,000,000 is the smallest loan size
• 5 years, 10 years, and 15 years are the choices for fixed rate.
• Maximum loan to value of 75%
• Rates are very low

Life Insurance Company Loan

• Usually no less than $5,000,000 loan minimum and can go up to $75,000,000 or more
• Rates are super low
• No more than 65% loan to value
• Amortization period of 25 years or 30 year

V. HUD (FHA) Loan

• No less than $2,000,000 loan size, no maximum size of loan
• Loan to value not to exceed 83.3% for a purchase and also for a refinance with no cash out.
• Loan to value not to exceed 80% for a refinance with cash out.
• 30 years to 35 years is length of fixed period.
• Super low rates. However mortgage insurance premiums have to be paid with the mortgage.
• Closing costs and fees are greater than other programs, but you get a very low rate for a very long time. So for your property you might not have to get it refinanced in the future.

Regional Bank Loan

• Loan to value not to exceed 75%
• Most often, 3 to 10 years is the period of time the rate is fixed.
• Usually there is a 30 year term.
• Minimum loan size not to go below $500,000. Most often, loan size not to exceed $10,000,000.
• Some of the lowest rates available for those wanting a fixed rate of 3 or 5 years
• When the fixed rate period is up, rates will adjust

Source: https://apartmentloanstore.com/blog/how-do-you-finance-apartmentmultifamily-building

Hope that is helpful.