These are all 30-year fully-amortized loans. You have a choice of an ARM tied to 6-month LIBOR, a three-year hybrid, a five-year hybrid, a seven-year hybrid, or a ten-year hybrid. By far the most popular choice is the five-year hybrid.
The interest rate is incredibly low, starting as low as 3.87% for a purchase money, 5-year hybrid in a Tier I market. Properties in less-populated and/or less-desirable areas – known as Tier II and Tier III markets – have slightly higher interest rates.
The ARM program and the hybrid programs, after the initial fixed rate period, are tied to six-month LIBOR, with a 3.5% interest rate floor, a ceiling of 6% over the start rate. On the hybrid loans, there is no periodic rate increase cap on the initial rate readjustment, immediately after the fixed rate period. After the first rate readjustment, there is a 1% rate readjustment cap every six months. This loan has no negative amortization.
This program can be used for apartment loans as small as $300,000 to as large as $20 million. Apartment loans smaller than $1.5 million have slightly higher interest rates, but the interest rate is still very, very attractive.
The loan-to-value ratio is between 75% and 60%, depending on the property’s quality, age, and location, and whether the loan is a purchase-money loan, a rate-and-term refinance, or a cash-out refinance. Your Blackburne & Sons loan officer can work with you to quickly make this determination.
In addition to apartments, this program can also be used for 4-star and 5-star mobile home parks (no single-wide coaches), mixed use properties (maximum of 40% commercial), student housing, and, surprisingly, low-income housing. Caution: Low-income housing deals are valued based on the lower rents typically found in nearby middle-income areas, so the maximum loan amount is often lower than expected.
Personal guarantees are required from Managing Members, General Partners, corporate officers, and individuals owning 20% or more of the property.
Loans to foreign nationals are available, up to 50% loan-to-value.
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