Interest Rate Volatility in Multifamily Creates an Opportunity for a Shameless Plug as to Why You Need A Mortgage Broker.
Looking back on interest rates for multifamily loans from the end of last year until now, the disparity in what type of lender was providing the most competitive financing in those six or seven months is pretty remarkable. Last year, a seven-year bank loan at 4.5% was about 75 basis points cheaper than a ten-year CMBS loan and 40 basis points cheaper than a ten-year agency loan. That would be a pretty easy decision for most investors as the simplicity of the non-recourse bank structure is preferred by most.
Only a couple months later, from the first discussion of a rate cut early this year and until very recently, that spread basically inversed, with few banks offering ten-year money and at rates around 50 basis points above CMBS and 75 basis points above agency. When you combine that with the chance to obtain two or three-years interest only on the front end, and the banks’ general loathing to provide cash out on quick value add deals, all of the sudden the much maligned CMBS option starts to look pretty attractive in certain cases.