7 year fixed w/ 15-30 amortization

6 Replies

Originally posted by @Ryan Moore :

Dumb question, but when a lender says 7 year fixed w/ 15-30 year amortization, that's just an ARM correct?

Not a dumb question and the answer is yes, it'a an ARM. Not sure what the 15-30 piece is because usually a 7 year ARM has a 30 year amortization, not 15.

  • Find out what the ARM is tied to (T Bill, LIBOR etc...)
  • Check the index's volatility with charts online
  • Figure out what the rate will adjust to in 7 years.
  • Decide whether you're going to have the property 7 years from now
  • Would a shorter term ARM suit you better or would a 30 year fixed work better
  • What's the prepayment penalty and for how long

Just a few things to find out

Best of luck

Stephanie

Originally posted by @Stephanie P. :
Originally posted by @Ryan Moore:

Dumb question, but when a lender says 7 year fixed w/ 15-30 year amortization, that's just an ARM correct?

Not a dumb question and the answer is yes, it'a an ARM. Not sure what the 15-30 piece is because usually a 7 year ARM has a 30 year amortization, not 15.

  • Find out what the ARM is tied to (T Bill, LIBOR etc...)
  • Check the index's volatility with charts online
  • Figure out what the rate will adjust to in 7 years.
  • Decide whether you're going to have the property 7 years from now
  • Would a shorter term ARM suit you better or would a 30 year fixed work better
  • What's the prepayment penalty and for how long

Just a few things to find out

Best of luck

Stephanie

Awesome, thanks for the above and beyond response :-)

@Ryan Moore , @Stephanie P. covered it pretty well above. 

I just wanted to add what we are getting for terms so you have an idea of what is out there. Keep in  mindd thought that every market is different too.

We are working on getting two properties right now, a duplex and a 4 plex. The terms we are being quoted from our existing commercial portfolio lender are 20% down, 5.125% interest, amortized over 25 years and locked in for 10 years with a maximum of 1% per year increase in rate starting in year 11, and a max rate of 11.125%.

From the feedback I get here on BP those are great terms. Unfortunately for you, they only lend within my state.

Dan Dietz

Originally posted by @Daniel Dietz :

@Ryan Moore , @Stephanie Potter covered it pretty well above. 

I just wanted to add what we are getting for terms so you have an idea of what is out there. Keep in  mindd thought that every market is different too.

We are working on getting two properties right now, a duplex and a 4 plex. The terms we are being quoted from our existing commercial portfolio lender are 20% down, 5.125% interest, amortized over 25 years and locked in for 10 years with a maximum of 1% per year increase in rate starting in year 11, and a max rate of 11.125%.

From the feedback I get here on BP those are great terms. Unfortunately for you, they only lend within my state.

Dan Dietz

5.125% is an excellent rate for a 10 year ARM.

How many points?

@Stephanie P. , no points, and about $3500 of closing cost on a 400K loan. They do want our DSCR to be 1.2 or better for that rate. They will loan down to a 1.1 DSCR for existing customers, but higher rate and costs too. We prefer to keep the more conservative ratio too. If there is not at least that much 'meat in the deal' we will keep looking until we find one :-)

Dan Dietz

Originally posted by @Daniel Dietz :

@Stephanie Potter, no points, and about $3500 of closing cost on a 400K loan. They do want our DSCR to be 1.2 or better for that rate. They will loan down to a 1.1 DSCR for existing customers, but higher rate and costs too. We prefer to keep the more conservative ratio too. If there is not at least that much 'meat in the deal' we will keep looking until we find one :-)

Dan Dietz

 Jump on that rate while you can.  Well done and you're right about "meat in the deal."  Too many good deals out there to tie up money on deals that don't pay.

Stephanie