Commercial loan on SFR refi?

Question

Anyone ever do a commercial loan to refinance SFR's en masse under a blanket or a similar strategy? 15 of my SFR's have a ton of equity Icwant to tap and I'm curious what banks generally offer. I've read somewhere the longest term would be 20 years, but with the rates so low, it might still be the same from a monthly payment standpoint as using private lender money over with a higher rate w/ a 30 year term.

Also, what are the banks doing from a LTV standpoint on a cash out refi like this? 80LTV? Just wondering who has gone commercial credit like this and what opinions there are with respect to SFR's. I'm out if conventional access though on other properties outside of these 15 in scope here. Thoughts?

Marty Johnston · Answer

@Travis C. commercial & portfolio loans to some lenders are synonymous. Many 'secondary market' lenders who offer commercial loans are really referring to 1-4 Unit non-owner occupied investment properties. Not to be confused by Fannie and Freddie's programs, which may also be available to individuals buying properties for investment purpose, but in their personal name. In short, there are a good number of lenders who offer 30-yr Commercial / Portfolio loans for 1-4 Unit investment properties. Terms can range from: 5/1 ARMs, 10/1 ARMs 15-Yr Fixed, 25-yr, or 30-yr fixed (Yes even for commercial loans - but more often available through your non-bank or 'Bank-Alternative' lenders).If you have a portfolio of 15-SFR's with strong equity, you're likely looking at a 75% LTV max (assuming good credit >720-740+) with a non-bank lender. Benefits there are still the option of a 30-yr fully fixed mortgage, possible I/O options for a portion of the term (if desired) among others, and generally less documentation (no underwriting of tax returns, W-2's or 1099's, paystubs etc). Show POF via bank statements, entity docs, appraisal, background check and credit pull, clean title, HOI per lender's guidelines, and close. Right now the biggest delays are due to appraisals.Something to keep in mind - properties with values <$75,000 can prove difficult to fund by many commercial lenders - they like values to be >$75,000 or if multi-unit, $50,000+ value /door. Some will go down to $50,000 on an SFR's value if the rest of the properties in the portfolio have values >$75,000 and it's part of the portfolio - exceptions can be made in certain circumstances.Rates here if loan amount is >$1M are often in the 5% range. You can often buy your rate down into the 4% range with a couple lender points paid at close.A Bank or Credit union could probably get you 4.0% on a 10-yr term amortized over 25 years - but expect a full-doc and global DTI underwrite to obtain bank or credit union financing. Some investors prefer the simple route and best likeli-hood of funding - others are willing to go through the bank and credit union scrupulous UW process to obtain that better interest rate. It's really up to the investor.Hope this helps!MJ

Marty Johnston · Answer

@Travis C. My pleasure! Glad I was helpful. Let me know if you'd like to chat more on this - sent you a DM with my contact info.Good luck with your bank! That's a sweet deal if they pull through!!

Travis C. · Answer

@Marty Johnston I appreciate the perspective! I think I have found an actual local bank who will do a portfolio blanket (they keep the paper as their own investment) on their own commercial side on a 20 year term at about a 4.75% and 80 LTV, but they are moving super slow which is bugging me to some degree. Trying to see what else is out there option wise and your remarks are precisely why I put this out there - to gain more information. Really appreciate it!