Apartment finance is weathering the current prestige accident nicely compared to other sectors of the industrial mortgage business. For example, owner busy conventional mortgages are experiencing critical restrictions and loan requests above 60% loan to value, that do not fit the Sba guidelines have few, if any options.
In contrast, 80% financing on purchases and 75% loan to value on refinances, is still an option. Long term fixed rates, like five, ten year and even 30 year is available. Also, interest rates themselves are very low (2/10/09) as we are finding low 6%'s and even high 5%'s for strong borrowers on these long term high rate. As a supervene many borrowers that went with floating conduit loans are now opting to refinance into long fixed rates due to concerns with where rates will go if inflation kicks in.
Apartment Finance
One of the main changes with multifamily finance is with underwriting going "global". Many veteran apartment owners will be unaccustomed to the supplementary scrutiny. Historically, most of the underwriting focused on the property itself, primarily in concern to the cash flow of the property. Better known as the debt coverage ratio, underwriting wanted to rule if the properties income could carry all of the connected expenses, and the proposed loan. That's essentially was the main focus.
Now however, underwriters also want to recognize all of the borrower's income and expenses both personally and from other, none connected businesses. What they are investigating is either the borrower is above water on a cash flow basis, over the entire financial picture, including the branch property.
Most borrowers will put up with the supplementary "brain damage" as they beyond doubt have no other choice with apartment finance. As the golden rule points out "he who has the gold, makes the rules". And also just accepting it, the loan programs are still very sharp for the borrower.
Apartment Finance - How About Some Good News?