I have two good faith estimates. Which Loan is better?

6 Replies

I own the property and am going to cash out. I purchased a duplex with a line of credit on my home and will use the money to pay off line of credit. I have two banks (both local) that have given me a good faith estimate. For legal reasons, I would rather keep the property in the LLC name. Bank 2 is a commercial loan which would keep loan off of credit score. My current credit score is 719. Which do you think is better?

Bank 1:

LTV 75% can lock in a 30 year fixed. We have estimated the costs to be around $1,700 assuming $90,000 loan with some changes depending on whether taxes and insurance are escrowed or not. The property would need to be in your name and not LLC and you are limited to no more than 3 investment properties to be considered a casual investor.

Bank 2:

Approximate $100,000 Loan amount, NYP +1.25% (currently 4.50%), ceiling of 7.0%. The spread of 1.25% above New York Prime will be fixed for 15 years. Max LTV is 85%.

Approximate $1,750.00

That's a great question.  I'd love to see what @Ben Leybovich has to say about this one, he's darn good at this finance stuff.

As long as the property stays in the LLC it will only be financed by a portfolio lender. If that's important to you, then #1 is not an option.

I'd take #2 anyhow, if everything is as is...

This is why banks are required to give you an APR to review. The APR takes into account the fees and the rate to come up with the APR number.

Assuming on "bank 2" it's the "spread" and not the actual "rate" that's fixed for 15years, which is just another way of saying an ARM, I don't like the interest rate risk, and I personally would go with loan #1.

Hey Waynebrealetor, the spread of 1.25% is fixed. The ceiling means no matter what rates do during the 15 years, it won't go higher than the ceiling rate.

@Steve Moore One thing to consider too with the GFE's is how much they typically vary from that particular lenders final numbers.  I use a lender that often overestimates all the charges on the GFE, so that when the final real numbers come in...they come in under what I have budgeted for. some lenders GFE's will be spot on, others might underestimate some costs.

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