mortagesandforeclosures

by Bart Icles

Everyday, we are facing a world full of dark economic issues that it is not unusual to see people scrambling to look for ways to brace their financial standing. If you are thinking that your situation seems to be hopeless, better think again. Indeed, we are in a current credit crisis and obtaining a commercial loan is not as easy as before.

While it is relatively difficult to be granted with other types of commercial mortgages, multifamily loans remain to fair comparatively well. The notable stability of the multifamily asset class contributes to its sustained good performance, and borrowers can still look forward to high levels of financing, long amortization schedules, and low fixed rates.

Multifamily loans continue to go up to about 80% loan to value on purchases, and up to about 75% loan to value on refinances. Recently, other asset property mortgages have been restricted to about 60% to 65% loan to value.

Government support through established financial and mortgage institutions has made high leverage on multifamily loans possible. These institutions buyout the mortgage made by borrowers from banks and other lenders that fund them and in this manner, the increased risks due to the high levels of leverage are taken off from the shoulders of lenders and passed on to government.

A lot of conventional commercial bank financing (other than multifamily) is limited to 20-year amortization schedules. On the other hand, it is usual to obtain a 30-year financing program for multifamily mortgages. Other multifamily financing programs can even grant 35- to 40-year amortization schedules. This is quite significant because longer amortization terms make way for reduced monthly payments.

In the past year, interest rates on mortgages were very unpredictable, including those for multifamily loans. Margins have surged from as low as 150 base points prior to the financial crisis to as high as 350 base points. Nevertheless, interest rates for multifamily loans have seen some stability this year and most multifamily loans between $400,000 and $5,000,000 have interest rates of about 6%.

Although underwriting standards and practices have been made tighter within the multifamily loans sector, multifamily mortgages still remain among the most liquid areas of business. Borrowers are still assured that they can get sufficient funding through multifamily loans. In these crisis-stricken times, the key in successfully obtaining a multifamily loan with the best terms and lowest rates is knowing which lenders and banks to seek funding from.

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