Freddie Mac Floating-Rate Financing for Multifamily Properties
Freddie Mac Insured Floating Rate Loans for Acquiring and Refinancing Multifamily Developments
If you're a developer or investor looking for flexible and affordable adjustable-rate financing, a Freddie Mac Floating-Rate Loan could be the ideal solution. Freddie Mac Floating-Rate Loans typically offer some of the lowest interest rates found anywhere, and can often be used effectively as a bridge loan, especially for investors who plan to sell the property or get permanent financing in the near future. Floating-Rate loans are available for property types including standard multifamily housing, manufactured housing communities, seniors housing, and Targeted Affordable Housing properties (including cash LIHTC Year 4-10 and 11-15 and Section 8 loans), but are not available for cooperative housing properties.
Freddie Mac Floating-Rate loans start at a minimum of $5 million (though smaller loans can be considered), allow LTVs of up 80%, and have 5, 7, and 10 year loan terms with amortizations of up to 30 years. Plus, these loans are non-recourse, permit eligible mixed-use properties, and allow for both the purchase and refinancing of multifamily properties.
To learn more, check out Freddie Mac’s official Floating Rate Loans Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac Floating Rate Loan program.
Sample Freddie Mac Terms For Floating-Rate Loans
Size: $5 million to $100 million (however, smaller and larger loan sizes will be considered)
Terms: 5, 7, and 10-year terms, partial term and full-term interest-only financing available. Typically, interest-rate caps are required and can be purchased from a third-party. Caps are not required for loans with an LTV of 60% or less.
Amortization: Up to 30 years
Interest Rate: Based on 1-month LIBOR index
Freddie Mac Floating-rate loans are available for:
Standard multifamily housing properties
Manufactured housing communities
Seniors housing developments
Targeted Affordable Housing properties (including cash LIHTC Year 4-10 and 11-15 and Section 8 loans)
Freddie Mac Floating-Rate Loans are not available for cooperative housing properties.
Limited partnerships, tenancies in commons (TICs), corporations, or limited liability companies
For loans over $5 million, the borrower must be a single purpose entity, while for loans under $5 million, the borrower may be a single asset entity
For tenancies in common, there must be no more than 10 tenants in common, and each must be a single purpose entity (SPE)
5-7 Year Loans:
Partial Term Interest-Only: 75%/1.30x
Full Term Interest-Only: 65%/1.40x
7 Year Loans:
Partial Term Interest-Only: 80%/1.25x
Full Term Interest-Only: 70%/1.35x
7+ Year Loans:
Partial Term Interest-Only: 80%/1.25x
Full Term Interest-Only: 70%1.35x
Prepayment Options: Options include:
1-year lockout followed by 7 years of 1% prepayment penalty
3% penalty in 1st year, 2% penalty in 2nd year, followed by 6 years of 1% prepayment penalty
5%, 4%, 3%, 2% step-down for the first 4 years, followed by 4 years of 1% prepayment penalty
7%, 6%, 5%, 4%, 3%, 2%, 1%, 1% step-down prepayment penalties (only available for 10-year capped floating rate loans)
*No prepayment penalties at all for the last 90 days of the loan
Refinancing Test: No test needed for amortizing loans with a DSCR of at least 1.40x and an LTV of less than or equal to 65%. Interest-only loans must pass a refinancing test before they are approved.
Assumability: Loans are assumable with lender approval, but require a 1% assumption fee paid to Freddie Mac. May also require an underwriting fee paid to the lender (typically $5,000.)
Timing: Borrower will typically receive a commitment between 45 and 60 days after initial application; third-party report timing and borrower due diligence submission may speed up or slow down the process
Very competitive interest rates
Loans are non-recourse
Certain mixed-use properties are eligible
Can be effectively used as a bridge loan in many situations
Requires third-party reports including Phase I Environmental Assessment, Appraisal, Physical Needs Assessment, Seismic Report may be required for properties in Seismic Zones 3 and 4
Requires replacement reserves
Application fees required: $2,000 or 0.1% of loan amount (whichever is larger) for conventional first mortgages, $5,000 or 0.15% of loan amount (whichever is larger) for seniors housing, $3,000 or 0.1% of loan amount (whichever is larger) for targeted affordable housing loans
Typically requires a loan origination fee
Typically requires between $8,000 and $12,000 in legal fees
Lender application fees also required (avg. of $15,000, including third-party reports, but may vary based on specific lender)
2% rate lock fee usually required (refunded after Freddie Mac purchases loan, usually around 30 days post-closing)