Apartment Loan Terms and Conditions For Buyers and Investors


Apartment loans are designed to finance multifamily properties. These loans come in standardized types that lenders sell to Fannie Mae and Freddie Mac, or customized versions known as portfolio loans that lenders keep on their own books.


Applicants for apartment loans are evaluated much like they would be for a mortgage on a single-family home. This process includes evaluating the borrower’s credit and financial profile, income and tax returns.

Interest Rates

Many prospective borrowers and investors use an apartment loan calculator to determine affordability when shopping for multifamily property loans. A calculator may include an amortization schedule that depicts the proportion of interest versus principal in each monthly payment. The interest portion starts out high and gradually decreases over the term of a multifamily mortgage, with the last payments comprising mostly (if not entirely) principal. Other factors that should be taken into consideration when estimating monthly payments include escrow for taxes, replacement reserves and other expenses.

Lenders will typically take a more conservative approach to financing multifamily properties than single-family homes or condos. Apartment loans may require a higher level of scrutiny to qualify for, and the lender may seek more qualitative information about an applicant’s rental property ownership and management experience.

Apartment loan rates are largely dependent on a property’s market and location, its debt coverage ratio, or DSCR, as well as the borrower’s experience with real estate investments. Most lenders offer multifamily loan products with different terms, interest rate ranges and maximum LTVs.

Fannie Mae, Freddie Mac and FHA offer nonrecourse apartment loans in amounts up to $250 million for affordable, student, seniors, military housing and manufactured housing communities, as well as traditional apartments. These loans are backed by the government agencies and offer 30-year fixed rates with a maximum LTV of 70 or 75 percent.

Amortization Schedules

A loan amortization schedule is a table that describes how much of each regularly scheduled payment chips away at the principal and interest on the mortgage. This can be provided in 후순위아파트담보대출 either a written form or as a graphic illustration of the payments over time.

The number of rows in the amortization schedule will vary by term length (e.g. 360 months for a 30-year mortgage). A typical row will include the beginning balance, the monthly payment, the amount paid toward interest and the remaining balance of the loan.

It’s important for borrowers to understand how their payments are calculated in order to make informed decisions about their apartment loan options. It can also help if they’re considering making pre-payments on their loan, as the amortization schedule will show them how these payments would be applied to the loan balance.

While it may seem complicated, an amortization schedule is actually quite simple to calculate. The outstanding loan balance is divided by the monthly interest rate, and then the remaining balance is split into two parts – the principal and the interest charge. The amount of each monthly payment that goes toward interest will decrease over time, while the principal portion of the payment will increase. In a fully amortizing loan, the percentage of each monthly payment that pays off interest will eventually decrease to zero.

Down Payment Requirements

Most apartment loans are non-recourse, meaning the lender cannot seize borrowers’ personal assets in case of default. However, some lenders may require a substantial down payment as collateral in the form of an escrow account that holds a security deposit equal to four or five months of rent plus one-time fees like pet deposits.

There are a variety of loan options for apartment buildings, including government-backed financing through Fannie Mae, Freddie Mac and HUD. These programs offer fixed rates and 30 year amortizations and have low credit minimums. They also allow the borrower to prepay without a penalty. Many of these programs are also assumable, which makes it easier for the new owner to assume the existing loan.

Bank balance sheet loans are also an option and often have lower credit minimums. These loans are typically based on the borrower’s credit score and income documentation and may also require two years of tax returns and a rent roll for the property. Generally these loans are not as flexible as private capital and may only allow up to 70% LTV.

Finally, life companies are another source of apartment building financing and provide some of the lowest long term interest rate loan options in the market. These loans are usually non-recourse and have a high debt service coverage ratio of 1.2x or higher, however some may not be as flexible as other commercial financing sources.

Closing Costs

Closing costs are a part of every real estate transaction, but they vary depending on whether you’re buying or selling. For buyers, they can add up to as much as 5% of the price of your apartment building purchase. They include loan origination fees, appraisal, title and escrow costs as well as inspection and environmental fees. You may also incur attorney and bank document preparation fees. Some cities charge transfer taxes and mortgage recording taxes. These can be as high as 10% of the purchase price.

Before approving an apartment building loan, the lender will review the borrower’s credit, income and personal and business tax returns as well as two years of operating statements and a rent roll for the property. If it’s a mixed-use property, the lender might want to see financial statements for the commercial component as well.

In NYC, the vast majority of apartments are co-ops rather than condos or single-family homes. Co-op ownership differs from condominiums and single-family home ownership in that you’re not purchasing real property but instead shares of a corporation. Because of this unique form of ownership, you’ll incur different closing costs than if you were purchasing a condominium or single-family home. In addition, co-ops typically charge move-in and move-out fees as well as board application fees. These can run $500 – $1,500+ per apartment.