Loan Assumption and the Freddie Mac SBL Program
Like all other types of Freddie Mac Multifamily financing, loans offered through the Freddie Mac SBL program are fully assumable, with approval and a 1% fee. The fact that these loans are assumable is ideal for borrowers, as they can simply pass on the loan to the next owner of the building, instead of paying a prepayment penalty. This can also be beneficial for a new owner, as they will not need to go through the entire loan approval process from scratch, and won’t have to order new third-party reports, such as an Appraisal or a Phase I Environmental Assessment.
Not all new owners will want to assume a loan, especially if interest rates have fallen, or if the loan is already a few years into its term (as this will greatly increase the down payment the new owner will have to provide). However, assumable loans (like the Freddie Mac Optigo Small Balance Loan) give a borrower a fantastic exit option in the first few years of a commercial mortgage, when prepayment penalties are high and the new borrower won’t have to contribute an unreasonably high down payment to assume the loan.