I am approaching my 10 max Fannie/Freddie mortgage mark. From the research I have done it looks like my only options are to find a portfolio lender which I have had a hard time doing OR you can get commercial loans and lump multiple properties into one loan.
Can someone explain the commercial loan side ... how it works/advantages/disadvantages.
Next step is commercial line of credit. But these are different than your traditional fixed term loans. There are several things to consider.
1. The amount of the loan. Typically banks dont want to do a small line of credit for a single home. So this is for building a portfolio.
2. The LTV they will lend. This is more complex than just a simple 25%. For example some banks will make you spend all your downpayment on the first homes and then 100% fund the rest up to the LOC limit. Others may go 50/50 on the first few until your down payment is spent and then go 100% on the rest. Others may start at 25% from the first home.
3. The interest rate which will usually be variable. For example prime plus 1 with 5.5% floor. Which means your rate is 5.5% unless prime +1 gets bigger than that.
4. The amortization which will determine your monthly payments. 15 or 20 years are common
5. Balloon term: Most commercial lines have balloon payments in 5 or 10 years. At that time you have to refinance or pay off. At prevailing rates of course.
If you already have 10 homes you have experience and would be a good candidate for a commercial LOC if you have good income and credit.
Thanks Anish -
So does this mean I refinance some of my current properties into a commercial line of credit OR does it mean I will need to be buying multiple properties at a time for it be worth a lenders time.
My income in strong and my credit is excellent - would the big banks be a good solution or would I want to stick with local banks as I did when I was looking for a portfolio lender.
@Adam Craig are you married? If yes, can your wife qualify for a mortgage? She could potentially obtain 10 mortgages on her name and together you both could qualify for 20 mortgages...
@Adam Craig - If you are dealing with sub $250k properties you would probably want to to a LOC if you are buying one at a time. You could also seek out a portfolio loan and move your 10 to that and then continue to buy as you have.
Anish covered most of it. I am currently in the middle of closing a portfolio deal for 9 properties. It is a 25 year payment schedule (amortization) with a 5 year balloon at 5% (Could have done 3 years at 4%) with a 75% LTV (Maybe 80% they said)
Sort of new this LOC concept so thanks for your patience.
Who would I go to for this - a mortgage broker/big bank/small bank? Why didnt any of the bankers I called to ask if they do portfolio loans tell me about this option.
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