How Does a Multi-Family Loan Work? Here Are the Details
Multi-family loans can be acquired through mortgage brokers and directly through a variety of financial lending companies
. A multi-family loan is designed for the purchase or refinancing of multi-family properties. A multi-family property is defined as one in which five or more dwelling units exist and no more than 20 percent of the net rentable area is rented to or will be rented to non-residential tenants.
Multi-family housing investors can locate economical, flexible, and tailored financing options when they are looking to acquire a multi-family loan. A broad array of financing options exists for a variety of multi-family housing as well as a broad array of loan amounts. Since the loans are often tailored to the specific type of multi-family housing, it is important to note the differences.
Four specific types of multi-family housing properties exist. Multi-family housing communities can include affordable housing, seniors housing, manufactured housing, and student housing properties. This type of property can include apartment buildings, condominiums, or cooperatives with five or more individual units and they can be located within rural or metropolitan areas.
Multi-family affordable housing is defined as one in which certain rent and occupancy restrictions are in place for the property. In particular, at least 20 percent of the individual units that are rented will be rented to households in which the gross earnings are 50 percent or less of the median income for the area. This monetary figure is adjusted for family size. The amount of rent is restricted to a figure that is affordable to individuals in this category.
Additionally, at least 40 percent of the individual units that are rented will be rented to households in which the gross earnings are 60 percent or less of the median income for the area. This monetary figure is adjusted for family size. Additionally, the amount of rent is restricted to a figure that is affordable to individuals in this specific category.
Senior housing can include independent living, assisted living, assisted living with Alzheimer's, or a combination of any of these categories. Typically, this type of multi-family housing involves a large number of individual units. Additionally, age restrictions and percentages for rentals per specific age bracket are usually in place as well.
Manufactured housing typically involves higher quality, professionally managed manufactured housing communities with a specific minimum number of sites ranging from 15 to 50 to even higher numbers. The limits on the number of rentable units are determined by the specific lender and the parameters that have been set for each specific type of loan.
Student housing involves a tenant base of student population, specifically, undergraduates or graduate students. To qualify as dedicated student housing a minimum occupancy rate must be preexisting. Typically, this type of multi-family housing is located near a college or university with a minimum number of enrolled students as well as being located within a specified radius of the campus.
As with any type of loan, multi-family loans have minimum amounts that must be borrowed in order to acquire the terms that are attached to them. Terms might include a fixed rate, variable rate, and a term between 5 and 30 years. Other terms also apply including prepayment provisions, vacancy assumptions, escrows, and more.
Multi-family loans are used for financing mixed-use properties. They sometimes have the potential for assumable financing as well as low or no pre-pay penalties. Many of these loans have flexible multi-family loan amortization rates. A multi-family housing project is a large venture. Acquiring the right type of loan, a multi-family loan, is essential to the project's success.
How Does a Multi-Family Loan Work? Here Are the Details
By: Joe Silla
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