So what in the world is a multifamily mortgage? Well, don’t worry we can help you with a better understanding of them. Multifamily mortgages are loans that are usually used by apartment complexes that cover living space used by more than four families at a given time. Usually commercial uses and business are the ones that use these types of loans and ascertain a rent from their buyers to pay back this loan. These loans are acquired by the use of any lender or bank that offers the service and is in accordance with the state and federal laws that oversee these mortgages.
Usually, the loan to value ration ranges from 75-90% LTV and the term can be from 10 to 40 year fixed rate as well. Mostly lenders won’t give loans to complexes that have fewer than 5 units. This is all at the discretion of the lender who will give the loan out. Certain factors can raise the limit on financing to those who have a positive cooperation already existent with the lender and/or who can have a foreseeable appreciation in value in later years.
Multi Family Basic Types Are:
- Duplex, Triplex, Fourplex
- Bungalow Courts
- Mixed-Use Building
- Multistory Apartment Buildings
Mostly though, lenders will approve of 80% of the value and require a 20% remainder of the multi family loan to be as down-payment. This is a safe net or security against pre/foreclosure or depreciation in value of the property. Most multifamily mortgage terms accompany a thirty year payment of principal plus interest. The usual pre-payment penalties can be issued in addition to other fees tacked on to the mortgage.
When considering taking on a multifamily mortgage you must also take on the risk that can be associated with a mortgage, in any sense, but to the point of this loan being of a higher amount. Ranging mostly from 500k to millions of dollars in amount can put a hefty sense of risk. Ensuring that the worth and benefit exceed the risk is important. If you are interested in obtaining a multifamily mortgage, than I recommend getting an evaluation and assessment of the property to calculate short and long term value and worth.