Fannie Mae Adjustable Rate Apartment Loans
Fannie Mae’s Multifamily Mortgage Business offers long term financing with a very competitive variable interest rate that is convertible to a fixed-rate.
Maximum loan amount: Maximum based on loan to value and debt service coverage ratios
- One-year lock-out, then declining prepayment premium; 4% second year, 3% third year, 2% fourth year, 1% thereafter.
- One-year lock-out followed by a 1% prepayment premium thereafter. No prepayment premium during the last 3 months of the loan term.
- 1.00x, using a DSCR calculated based on a variable underwriting rate equal to sum of (i) the Index, plus (ii) the investor spread, guaranty fee and servicing fee (the “Margin”), plus (iii) the interest rate cap escrow (if the cap term is shorter than the loan term), plus (iv) 3%, plus (v) the amortizing constant for that built-up rate.
- Mortgage loan amount shall not exceed that of a fixed-rate loan of similar terms.
- Interest rate adjusts based on changes to the underlying Index and is equal to the Index plus the Margin. In no event shall the interest rate ever be less than the Margin.
- No limit on rate changes.
- Structured ARMs have no built-in periodic or lifetime caps. Instead, the Borrower must purchase an interest rate cap from an approved interest rate cap provider.
- The term of the initial interest rate cap need not be equal to the term of the Mortgage Loan, but must be for at least 5 years.
- If the mortgage loan term is longer than the interest rate cap term, the Borrower must escrow monthly for the purchase of the next interest rate cap.
• No prepayment penalty charged at the time the ARM converts to a Fixed Rate.
• Minimal re-underwriting; Lender determines that the current NOI can support the new Fixed Rate.
• No increase in the loan amount; loan may be eligible for a Supplemental loan.