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
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
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 :-)
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.
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.
@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 :-)
@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
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.