Apartment lending remains one of the bright spots within the commercial mortgage business and borrowers can still expect long term, fixed rate financing, high leverage loans and low rates.
For example, we are still seeing 30 to 35 year fixed rate financing, though 5 and 10 year fixed is more popular with borrowers. Amortization schedules remain at 30 to 35 years with some government backed programs. As far as leverage, borrower can still get 80% financing on purchases (85% on loan request over $3,000,000) and 75% on cash out refinances. Rates are strong as well with most in the 6% - 6.25% range(2/10/09) though for larger loans rates in the 5%’s are available.
Apartment Lending, Multifamily Lending
What the bad news? Conventional financing is limited and multifamily lending is getting more conservative from a global perspective. Historically multifamily underwriting has been focused almost exclusively on the subject property. Now, apartment lending is becoming more like typically commercial mortgages, where the entire borrowers financial situation is scrutinized.
Meaning the borrowers personal needs will be examined, other businesses will often be looked at, etc to make sure that the borrower cash flows overall. (Keep in mind though that some programs, where loan amounts are over $3,000,000 the borrower personally is still not looked at.) This global underwriting is often cumbersome for borrowers that are not use to it, but this is just the new reality and borrowers will have to be willing to “play ball” if they want to get their multifamily property financed.
All in all, despite the recent changes, apartment lending remains one of the most viable sectors of the business. Most importantly, the liquidity is still there with terms that still make sense for borrowers. Borrowers should be ready to provide more documentation than they are use to, but compared to other sectors where financing is all but gone, it looks really good.
