Portfolio/Commercial Loan Rates

5 Replies

Having been through a handful of conventional mortgages for buy-and-hold properties, I'm exploring a commercial/portfolio loan for my next SFH purchase.

For small investors who have been through this, anything I should specifically prepare for? I have experience and good track record to show, and should have a good property to show.

What rates/costs should I expect?

And lastly, should I be working through a mortgage broker? Or just call a few local banks and talk through it?

@Mike McCarthy I do all of my loans with commercial/portfolio lenders in Columbia, South Carolina. Here are some recent deals below in my market. My experience has been great with these types of lenders. So much easier than residential borrowing for a self-employed borrower. 

Arthur State; Quad; 4.0%, 5 year balloon, 20 year AM, 85% LTV, 630k loan closed in 1/21; .39 Fee, Cash out
Ameris: Duplex, 3.78%, 7 year balloon, 25 year AM, 76% LTV, 490k loan closed 2/21; .62 Fee, Cash out
Ameris: SFH, 3.78%, 7 year balloon, 25 year AM, 75% LTV, 245k loan closed 2/21; .62 Fee, Cash out,
Security Federal: Duplex, 4.125, 5 year balloon, 20 year AM, 69% LTV, 260k loan closed 9/20 .77 fee, Rate/term
First Reliance: Duplex/SFH, 3.75, 5 year balloon, 20 year AM, 80% LTV, 480k, loan closed 4/21; .50 Fee, Cash out

Thanks @Will Gaston appreciate the detailed response!  

After my last conventional mortgage, I'm looking for a simpler solution.  I could not believe how many documents, letters, explanations, and time they needed - and that's after having been through it before.  

How long do these loans usually take to close? 

@Mike McCarthy I've closed plenty in 30 days or less. 

The best way I can describe portfolio lending is borrowing money from a rich person that cares mainly about two rules.

1) LTV

2) Debt Service Coverage

If your LTV is below 75% and your DSC is about 1.25 you're almost always in good shape. Your mileage may vary but that's been my experience.

Great wrap-up @Will Gaston

I have one more Fannie/Freddie backed loan left to my name, so I have been starting to look at Portfolio options.

It looks like a major downside is the refinances every 5-7 years!

@Alex S. It hasn't been that bad in my experience. However, I would recommend getting 3 or more banks that could work with on a re-fi.

I don't trust banks when it comes to the balloon. They say there's no reason for them not to renew the loan but the paperwork says they can call it due. Hasn't been an issue in my case but I think it's always good to have options.