Bank and Credit Union Loans for Multifamily Properties

Bank financing is the most traditional type of multifamily financing, but it isn’t right for everyone. Many borrowers with strong sponsorship and financials may prefer to go with non-recourse Fannie Mae multifamily, Freddie Mac multifamily, HUD multifamily, or CMBS multifamily loans. However, bank loans do have their place in the multifamily financing space. 

Banks, unlike Fannie, Freddie, HUD, and CMBS shops, are independent institutions and can lend to their own guidelines. This means that terms, amortizations, and fees may be more flexible-- but again, they may not. The difference between getting a 5-year, 65% LTV bank loan with a 20-year amortization and a 10-year, 75% LTV loan with a 25-year amortization can be tremendous over the life of a property (or at least your holding period). 

Banks can be especially flexible with things like prepayment penalties, and can often provide loans without prepayment fees entirely. Banks, unlike Fannie, Freddie, and HUD, may also offer cash-out refinancing options that allow you to make property improvements or pay back investors without taking out supplemental financing. 

For those who need temporary bridge financing, a bank can also be a welcome alternative to a hard-money lender. Some banks may offer balloon payments, allowing investors more cash flow and lower mortgage payments during the property rehab process. 

Prospective Bank and Credit Union Commercial Loan Terms for 2022

• Size: $1 million to $50 million+

• Maximum LTV: 75%-80% 

• DSCR: 1.20x+ required 

• Term: Up to 30 years

• Amortization: Up to 30 years

• Interest Rates: Fixed and variable rates available, interest-only (I/O) options available