Hello everyone,
This is a commercial mortgage update to keep everyone informed during the pandemic. Commercial Mortgage Lending has slowed down and with some loan types has halted altogether. Fix and Flip as well as Fix and Hold loans are presently on hiatus until the pandemic subsides. But, there are several types of mortgages that are still available to investors.
First of all, residential investment property loans are still available. These properties will need to be from 1 to 4 units. None of the units can be owner occupied. Borrowers will not be able to do the loan in a LLC or a Corporation. None of the units in these properties can be commercial – they must all be apartments. The maximum loan to value on these types of loans will be 75%. If the purpose of the loan is to cash out, then expect for the loan to value to lessen and rates to rise.
Secondly, there are some commercial properties that are still being lent on. Generally these properties are Apartment Buildings, Office/Retail Buildings, and Mixed Use buildings. Due to the pandemic, the max loan to value on these properties is at 65%. The loan to value is less for those investors looking to take cash out. The max loan amount is 1.5MM with rates in the high 5s and low 6s for A-Paper borrowers on an adjustable rate mortgage. For a 25 year fixed loan, rates are in the 8s presently. For borrowers with less than perfect credit (minimum of a 600 Fico), adjustable rates are as low as the 7s and fixed rates are as low as the 10s.
Obviously this is a big change from where rates and terms were about 2 months ago. The other big change is that loans are taking longer to close. In the past, investor loans could close in as little as 25 days. Whereas now, loans are closing in 45 days. This is mostly due to reduced underwriting staff and difficulty getting appraisals done. The good news is that loans are still getting done.
Our opinion is that once the pandemic subsides things will gradually go back to normal. The keyword here is gradually. Commercial Mortgage Lenders nationally are concerned about what the pandemic will ultimately mean for property values. This is the reason why we are all seeing a reduction in loan to value lending. Prior to the pandemic, commercial mortgage rates were in the high 4s and low 5s for A-Paper borrowers. As well, loan to values were as high as 80% on a 30 year fixed loan. Expect that things will take a little time to bounce back once everyone is back to work.
We will keep everyone posted as to when guidelines loosen up and all the commercial mortgage programs are back. In the mean time, feel free to contact us with any questions or for a free consultation. We are here to help and are more than happy to give advice. Expect more Commercial Mortgage Update messages weekly.
Thanks,
Michael Meyer
President Spartan Commercial Mortgage Services
mike@spartancommercialmortgage.com
(860) 876-0572