• Skip to primary navigation
  • Skip to content

Freddie Mac Small Balance Loans

Non-Recourse, Fixed and Adjustable-Rate Apartment Financing

  • Home
  • Information
    • Loan Facts
    • Terms, Qualifications, and Guidelines
    • Term Sheet
    • Interest Rates
    • Portfolio Loans
  • Knowledge Base
    • Frequently Asked Questions
    • Glossary
  • Application
    • Application Process
    • Third Party Reports
    • Appraisal Process
    • Environmental Assessments
    • Property Condition Reports

Does the Freddie Mac SBL Program Offer Interest-Only Loans?

June 6, 2019 By Janover Ventures

Interest-Only Freddie Mac Small Balance Loans

Freddie Mac’s Optigo Small Balance Loan program offers partial and full-term interest only (I/O) loans to eligible borrowers. In fact, nearly all Small Balance Loans come with a standard interest-only period at the beginning of the loan, which is based upon the loan’s fixed-rate period. For 5-year fixed rate loans and 5/15 hybrid ARMs, the I/O period is 1 year, for 7-year fixed rate loans and 7/13 hybrid ARMs, the I/O period is 2 years, and for 10-year fixed rate loans and 10/10 hybrid ARMs, the I/O period is 3 years.

However, for properties in Small and Very Small Markets, partial term I/O loans are only available for loans with 7-year fixed-rate periods (1 year I/O period) and loans with 10-year fixed rate periods (2-year I/O period). I/O years may be added or subtracted for 4 basis points (0.4%) addition to or subtraction from the overall interest rate.

Full Term Interest-Only Small Balance Loans

In addition to the 1-3 year I/O periods that come standard with the Optigo SBL program, borrowers can opt for full-term interest-only financing, though this comes with additional restrictions. Terms for full-term interest-only loans vary by market size, and are listed below:

  • Top Markets: 80% LTV, 1.35x DSCR
  • Standard Markets: 65% LTV, 1.40x DSCR
  • Small Markets: 60% LTV, 1.40x DSCR
  • Small Markets: 60% LTV, 1.50x DSCR

The Benefits of Interest-Only Financing

Whether for a few years or an entire loan term, interest-only loans have significant benefits for commercial real estate borrowers. Most importantly, interest-only loans significantly reduce monthly mortgage payments, increasing cash flow, and allowing borrowers to use their savings to invest in other commercial properties (or other profitable, non-real estate investments.) However, interest-only loans greatly slow down the rate at which a borrower develops additional equity in a property, as all equity gains will be based on the market appreciation of the property, rather than the repayment of the loan principal.

Filed Under: Freddie Mac SBL, Freddie Small Balance Loans, Frequently Asked Questions Tagged With: Freddie Mac Apartment Loans, Freddie Mac Interest Only, Freddie Mac Multifamily, Freddie Mac SBL, Freddie Mac Small Balance Loans, Interest Only Apartment Loans, Interest Only Multifamily Loans

Reader Interactions

 

Multifamily.Loans, Inc. is a Janover Ventures company. Please visit some of our family of sites at: Multifamily.loans, Commercial Real Estate Loans, CMBS.loans, SBA7a.loans, Home.loans, HUD.loans, HUD 232, HUD 223f, HUD 223a7, SBA Express Loans, SBA 504 Loans, and OpportunityZones.Help.

 

 

 


Janover Inc.
7601 N Federal Hwy. Ste B140
Boca Raton Florida 33487

Email: hello@multifamily.loans

 

Terms of Use

Information

Loan Facts

Terms, Qualifications, and Guidelines

Term Sheet

Interest Rates

Portfolio Loans

 

Knowledge Base

Frequently Asked Questions

Glossary

Application

Application Process

Third Party Reports

Appraisal Process

Environmental Assessments

Property Condition Reports