What is the Highest LTV Multifamily Loan?
Highest LTV Multifamily Loans
1. HUD Multifamily Loans – 85% - 90% LTV
2. Mezzanine Financing – 80% - 85%
3. Freddie Mac Multifamily Loans – 80% LTV (Purchase & Cash-Out Refinance)
4. Fannie Mae Multifamily Loans – 75% - 80% LTV (Purchase & Refinance - 75% on Cash-Out Refinance)
5. Credit Unions – 75% LTV Purchase & Refinance with or without cash out
6. Community Banks 70% LTV
7. Commercial Mortgage-Backed Security (CMBS) Loans 65% LTV
1. HUD Multifamily Loans – 85% LTV to 90% LTV
Hud Multifamily Loans have the highest LTV with up to 85% on a purchase or refinance without cash out. 80% for refinances with cash out. But they go up to 87% LTV for affordable rent properties and 90% LTV for subsidized rent properties.
What you most likely wanted to know when you did a search on what is the highest LTV Multifamily Loan is what is the highest leverage loan that’s going to land you the largest loan amount. Keep in mind that Loan to Value can be very deceptive as it relates to loan size. Often lenders who are also salespeople will pitch a high loan to value to draw customers in. This LTV is actually in their loan program guidelines. Then what do you know – somewhere down the road other loan guidelines often knock the loan amount down. So the lender over promises only to under deliver.
Keep in mind that to produce the largest loan amount, it takes 4 components. Number one is LTV with HUD having the highest LTV. Number two is the lowest Debt Service Coverage Ratio (DSCR) with HUD having the lowest of 1.176. Number three is the longest amortization, with HUD having the longest with 35 years on acquisition or refinance and 40 years on new construction. And number four is the lowest interest rate. HUD Multifamily Loan Rates are often the lowest long term fixed rates.
HUD Multifamily Loans is the only multifamily loan program that achieves all four of these loan components. And that’s why HUD Multifamily is listed as number one. Not only does it have the highest LTV, but it can deliver it. If you are interested in a purchase or refinance, check out the HUD 223(f) Loan. For new multifamily construction check out the HUD 221(d)(4) Loan. To learn just about everything you need to know about this amazing loan product click on this link: HUD Multifamily Loans.
And here’s a HUD Multifamily Loan Glossary with 74 terms defined for a fast look up.
2. Mezzanine Financing – 80% - 85% LTV
Mezzanine financing is not really a loan but an ownership interest by a lender in the LLC or ownership entity that directly owns the property. What it achieves is higher leverage and a combined LTV with the first mortgage that can go up to 85% LTV. The first mortgage might be at 60 to 65% with the mezzanine portion adding another 15% to 20% to achieve 80% to 85% LTV.
3. Freddie Mac Multifamily Loans – 80% LTV
What makes Freddie Mac Multifamily Loans number three is that they can deliver 80% LTV on a purchase, or a refinance with or without cash out. Amortization is 30 years which is very favorable. Maximum LTV though is often only achievable in large or medium sized markets. Freddie raises interest rates and DSCR in small markets which lowers LTV and the loan amount. Click on this link to view Freddie Mac Multifamily Loan Rates.
4. Fannie Mae Multifamily Loans – 75% - 80% LTV
Fannie Mae goes up to 80% LTV for purchases or refinances without cash out. But most of our refinance requests are for cash out which then goes to a maximum LTV of 75% on this loan program. Click here to view Fannie Mae Multifamily Loan Rates. Fannie Mae will lend with the same rates and DSCRs in any size market. Click here to compare the Difference Between HUD and Fannie Mae.
5. Credit Unions – 75% LTV
Credit Unions can often achieve 75% LTV because of often having a lower rate and longer amortization of 30 years, than community banks. Also, they don’t tend to stress the underwriting interest rate higher during tough economic times like banks do, which gives them much better odds of hitting the maximum LTV.
6. Community Banks – 70% LTV
Community Banks might say they can lend up to 75% LTV, but more often they deliver 70% because of using a higher stressed underwriting rate when calculating the maximum loan amount. Also, their amortizations most often average 20 – 25 years which equates to a lower LTV.
7. Commercial Mortgage Back Security (CMBS) 65% LTV
Although CMBS loans have guidelines that say their loans go up to 75% LTV, they seldom achieve leverage of higher than 65% LTV. This is because these loans usually have higher rates and are constrained by debt yield, which is the net operating income divided by the loan amount. The lower the debt yield the higher the loan mount. Often CMBS loans are constrained by a 9 or 10% Debt yield which produces a smaller loan. See example below:
Annual Net Operating Income/Loan Amount = Debt Yield
NOI: $100,000/Loan Amount $1,250,000 = 8% Debt Yield
NOI: $100,000/Loan Amount $1,000,000 = 10% Debt Yield