30 year fixed - Investment Property Rate

[Joe Manning]

Any mortgage brokers out there that can tell me what rates are on a 30 year fixed mortgage for $1 million purchase price, 8 unit multifamily in Brooklyn, NY.  Ranges based on credit are fine.  Also, should I assume 20% or more for down payment for this type of investment?

[Darryl Dahlen]

Thanks for the vote of confidence Bryan. A 30 year fixed CRE loan is atypical of what lenders usually offer. A lot can happen in 30 years so lenders tend to shy away from locking in a rate on a commercial property for so long. As such, most lenders offer 5, 7 or 10 year loans with either a 25 or 30 year amortization. In most cases, rates are usually better on these loans since the lender's risk is mitigated via the shorter term.

That being said, you can indeed find loans that come with long(er) terms. Fannie, Freddie, and HUD offer longer fixed-rate loans with HUD offering a 35 year term. All of these programs are geared towards a sophisticated borrower with significant multifamily experience, net worth, and larger loan amounts. Although, Fannie has a small balance product for loans in the 1-3MM range. LTVs allow for 80-83% financing. All agency loans are non-recourse.

On the conventional side, there are some bank, credit unions, and CMBS lenders who offer 30 year options. As mentioned, the rates can be less attractive so you need to take that into consideration.

For most people, they would rather opt take a 10/30 loan to get a better rate in order to improve their cash flow, but there are some who prefer the comfort of locking in a rate for as long as possible knowing they're not going to sell.

You can also expect to put down more money. Outside of the agency loan programs, the going LTV on multifamily loans is 65-75%. Market, property condition, historical financials, and borrower experience/financial strength all play a role in what the LTV will be.

I'm a multifamily guy by trade so if you'd like to talk please feel free to reach out to me.