Freddie Mac Float-to-Fixed Rate Loans

Float-to-Fixed Rate Two-Plus-Seven Financing for Multifamily Properties

The Freddie Mac Float-to-Fixed Rate Loan (Two-Plus-Seven) is a versatile multifamily financing option that can be utilized for all conventional and affordable housing types ― with the exceptions of student housing, seniors housing, manufactured housing communities, and prestabilized assets ― while allowing the borrower to collect superior cash-on-cash returns for the initial portion of the loan term. Borrowers are even eligible to lock a coupon for the entire life of the loan at closing. Freddie Mac has dubbed these loans “Two-Plus-Seven” loans since there is an initial two-year period that is interest-only at a floating rate, followed by a seven-year period that takes on a fixed interest rate structure.

The float-to-fixed structure allows borrowers to enjoy the low cost of variable-rate financing for the first 24 months of their loan while locking in a fixed-rate at closing that will protect them from later market fluctuations. As an investor, the initial Two-year period is a great way to have more cash upfront to be used as needed. Additionally, the fixed rate can be locked in at closing, to protect the borrower from facing the possibility of a higher interest rate after the initial two-year period ends.

Freddie Mac Float-to-Fixed-rate (Two-Plus-Seven) Loan Highlights

  • Ideal for assets that may require light repositioning, although this is not exclusively required
  • No maximum unpaid principal balance (UPB)
  • Eliminates the risk of future Interest rate increases
  • Index locks available at closing, prior to a rate lock
  • Available for all conventional and targeted affordable housing within Optigo’s reach except for prestabilized assets, seniors housing, student housing, and manufactured housing communities
  • Supplemental loans permitted after the initial two-year float period, beginning the second year of the seven-year fixed period
  • Conversion of floating-rate to fixed-rate happens automatically

Freddie Mac Float-to-Fixed-rate (Two-Plus-Seven) Loan Sample Terms

Size: Sized based on fixed rate

Terms: 9 years: 2 years interest-only floating rate, 7 years fixed rate

Amortization: Up to 30 years

Interest Rate:

  • Variable-rate: 1-month London Inter-bank Offered Rate (LIBOR) + 7-year floating pricing + 20 basis points (BPS)
  • Fixed-rate: 7-year United States Treasury rate (UST) + 7-year fixed pricing + 20 BPS

Underwriting: Must pass Refinance Test using the aggregated term (2 years floating plus 7years fixed) with 2 years of Interest-only (IO)

Maximum Loan-to-Value (LTV) ratio/Minimum Debt Service Coverage Ratio (DSCR): Determined based on fixed rate

Prepayment Options: No prepayments allowed during the 2-year variable-rate period, defeasance permitted during the fixed-rate period

Timing: Typically 60 to 75 days from application to closing


  • Very competitive interest rates
  • Loans are typically nonrecourse
  • Automatic conversion to fixed-rate financing
  • Fixed-rate portion of the loan can be locked before closing
  • Supplemental loans allowed, starting in the second year of the fixed-rate period


  • Typically requires third-party reports, including Appraisal, Phase I Environmental Assessment, and Physical Condition Assessment
  • Updated third-party reports required at conversion to fixed-rate financing, which is paid for by Freddie Mac unless additional loan funds are requested
  • Application fee of $2,000 or 0.1% of the loan amount required
  • 2% rate lock fee usually required, which is refunded after Freddie Mac purchases loan, usually around 30 days post-closing