Rate term refinance

12 Replies

Hey guys,


I am looking to refinance a 5/1 ARM commercial loan into a 30 year fixed conventional rate. A lot of online lenders are saying "the rules" state they can only lend 75% LTV on investment properties. I have a local bank that is saying I can do 80% LTV. Do you guys know if it's just a Fannie/Freddie rule that you can only get 75% LTV for conventional rate term refinance?

Steve, for a conventional loan you are limited to 75% LTV. This is a hard and fast conventional rule. You can find the LTV requirements on Fannie Mae and Freddie Mac's site. There may be other loan programs out there that go above 75% LTV but they usually will have higher rates than a conventional loan.

Originally posted by @Steven Gebhardt :

Hey guys,


I am looking to refinance a 5/1 ARM commercial loan into a 30 year fixed conventional rate. A lot of online lenders are saying "the rules" state they can only lend 75% LTV on investment properties. I have a local bank that is saying I can do 80% LTV. Do you guys know if it's just a Fannie/Freddie rule that you can only get 75% LTV for conventional rate term refinance?

Is the property commercial? Why is there a commercial loan on a property that is eligible for conventional financing?  Just a couple of questions I would ask if originating the loan.  To answer your question, 75% is the max on an investment property limited cash out refinance (same as rate and term).  I've attached a link to the Fannie Mae eligibility matrix.  If you have a local bank that will do 80%,they are going to keep it in house and service it.  If the numbers work, take the 80%.

https://singlefamily.fanniemae...

@Stephanie P. @Jeff Shumway @Wenda Wang thank you guys for your input. But as you can see between the three of you there is some disagreement. Wenda said 75% is only limited to a cash-out-refinance. My banker said he could do 80% LTV with a Fannie Mae/Freddie loan.

Stephanie the property is residential but I got a commercial construction loan on it originally to do renovations + purchase the property. 

@Steven Gebhardt Well, the majority of the bank loans follow Fannie/Freddie guidelines. There are some local banks that they service the loans on their book, so no Fannie/Freddie rules need to follow. Also, different banks have different strategies to pack the loans and sell them, so slightly different rates/LTVs can be allowed for some loans. 

@Steven Gebhardt

Banks, especially smaller banks, tend to lend their own money. If they are selling to secondary (fannie/freddie) they will be stuck at offering up to 75%. If they are lending their own money with their own rules, then it is indeed possible for them to be able to lend up to 80%. You are assuming that they are selling their loans, though they could as there are other investors that buy as well.

I broker to lenders that offer 80-85% LTV so it indeed is possible. If they say they offer it, then I would believe that they do. We cannot advertise programs that we cannot offer, that is a violation.

Originally posted by @Steven Gebhardt :

@Stephanie P. @Jeff Shumway @Wenda Wang thank you guys for your input. But as you can see between the three of you there is some disagreement. Wenda said 75% is only limited to a cash-out-refinance. My banker said he could do 80% LTV with a Fannie Mae/Freddie loan.

Stephanie the property is residential but I got a commercial construction loan on it originally to do renovations + purchase the property. 

The term "limited cash out" is another term for rate and term refinance. Given what was described, you'll be limited to 75% LTV if it's being sold to Fannie and Freddie. If he's saying he can go to 80%, his company is keeping it in house for servicing unless he doesn't know what he's talking about.

When you say "commercial construction loan" do you mean a hard money loan? Sometimes terminologies can get mixed up in this arena, especially when dealing with LLC's etc...

@Stephanie P. thank you for clarifying. I wasn't sure what "limited cash out" meant but now that makes sense. 

The "construction loan" is basically a 5-year ARM that helped cover the entire purchase cost and some rehab cost. The bank gave me 78% of the ARV. So I was able to purchase and rehab the home with only $5,000 out of pocket.