Multifamily Refinances: Which option is best for me?

||Multifamily Refinances: Which option is best for me?

Are you considering a refinance of your multifamily loan?

If so, you’ve come to the right place! We have taken a look at two of our most popular multifamily refinance options: an interest rate reduction and FHA 223(a)(7). Each product has specific guidelines, but a simple comparison is below. For a more in depth analysis of these programs, click here.

Love Funding is proud to be your FHA finance expert. Please don’t hesitate to contact a member of our team to see if these programs could work for you.

INTEREST RATE REDUCTION FHA 223(a)(7)
OVERVIEW This program permits the modification of the existing loan only for the purpose of reducing your interest rate. Please note, your existing prepayment penalty must be paid in full and is absorbed in the new interest rate. If you have an existing FHA insured loan, this streamlined FHA program is designed to allow you to lower your interest rate, extend your term, fund project repairs and increase your replacement reserve.
QUALIFIED PROPERTIES Your property must have an existing FHA insured loan to be eligible. It must also be out of the lock-out phase before the request is submitted to HUD. Only the FHA mortgagee, or lender of record, can execute an IRR. Your property must have an existing FHA insured loan to be eligible. It must also be out of the lock-out phase before closing.
LOAN
AMOUNT
You will not be able to increase the loan proceeds; however, a minimum debt service coverage (DSC) of 1.05x is required based on T-12 operating financials and the new interest rate.

Your loan amount will be the lesser of:

  • Your original principal amount of existing insured mortgage
  • DSC of 1.11x (1.05x for non-profit borrowers)
  • 100% of your eligible transaction costs, including existing indebtedness, repairs, fees, third party costs and initial replacement reserve deposit
TERM
EXTENSION
No term extension is available.

HUD may approve a term of up to 12 years beyond the remaining term of your existing mortgage, but not to exceed the original term. Additionally, term extension requests must be supported by condition of property, replacement reserve balance and/or debt coverage ratio.

FEES &
EXPENSES
There are minimal fees and expenses:

  • No financing fees.
  • Prepayment penalties, lender legal fees, the Ginnie Mae fee and title/recording can all be paid through premium generated by your interest rate.
  • Borrower legal fees, if any, must be paid out of pocket at closing.
There are fees associated with FHA 223(a)(7):

  • HUD application fee equal to 15 basis points paid at application submission.
  • Most of your other transaction costs are eligible for inclusion in your mortgage.
  • Prepayment penalties can be paid through mortgage proceeds and/or a premium generated by the interest rate.
OTHER REQUIREMENTS Other FHA requirements include:

  • Replacement reserve escrow remains in place.
  • No third-party reports required (a CNA is required if more than 10 years have elapsed since last inspection date).
  • Mortgage insurance premium (MIP) remains at existing level.
Other FHA requirements include:

  • Replacement reserve balance must be transferred in full at closing.
  • A new capital needs assessment (CNA) is required (a waiver is available if HUD has reviewed a PCNA within the last 5 years).
  • MIP of 25-50 basis points in addition to the locked interest rate.
TIMING The process takes approximately 30-45 days. Underwriting is not required; however, HUD asset management approval is required. This process takes approximately 90-120 days with required Love Funding underwriting and HUD production review.
2018-05-16T04:25:23+00:00 Resources|