Freddie Mac Float-to-Fixed-Rate Loans (Two-Plus-Seven)
Freddie Mac Float-to-Fixed-Rate Loans have nine-year terms; a two-year period with a variable interest rate, followed by a seven-year period with a fixed interest rate.
Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get QuotesFreddie Mac Float-to-Fixed-Rate Financing for Multifamily Properties
The Freddie Mac Float-to-Fixed-Rate Loan, also referred to as the Two-Plus-Seven, has an initial two-year period featuring a variable-interest rate, followed by a seven-year period featuring a fixed-interest rate. These loans are quite versatile, allowing for the financing of all conventional and affordable housing types, with the exceptions of student housing, seniors housing, manufactured housing communities, and pre-stabilized assets. Plus, borrowers can lock a coupon for the fixed-rate portion of the loan at initial closing, reducing their financial risk.
To learn more, check out Freddie Mac’s official Float-to-Fixed Loan (Two Plus Seven) Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac Float-to-Fixed Rate Loan program.
Sample Freddie Mac Terms for Float-to-Fixed-Rate Loans in 2023
Size: Sized based on fixed-rate
Terms: 9 years: 2 years floating-rate, interest-only, 7 years fixed-rate
Amortization: Up to 30 years
Interest Rate:
Variable-rate: 1-month SOFR + 7-year floating pricing + 20 bps
Fixed rate: 7-year UST + 7-year fixed pricing + 20 bps
Maximum LTV/Minimum DSCR: Sized based on fixed-rate
Prepayment Options: No prepayments allowed during the 2 year variable-rate period, defeasance permitted during the fixed-rate period
Timing: Typically 60-75 days from application to closing
Advantages:
Very competitive interest rates
Loans are typically non-recourse
Automatic conversion to fixed-rate financing
Fixed-rate portion of the loan can be locked before closing
Supplemental loans allowed (starting in the second year of the fixed-rate period)
Disadvantages:
Typically requires third-party reports, including Appraisal, Phase I Environmental Assessment, and Physical Condition Assessment
Updated third-party reports required at conversion to fixed-rate financing (paid for by Freddie Mac unless additional loan funds are requested)
Application fee of $2,000 or 0.1% of loan amount required
2% rate lock fee usually required (refunded after Freddie Mac purchases loan, usually around 30 days post-closing)