Are Freddie Mac Small Balance Loans Assumable?
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Like all other types of Freddie Mac Multifamily financing, loans offered through the Freddie Mac SBL program are fully assumable, with approval and a 1% fee. The fact that these loans are assumable is ideal for borrowers, as they can simply pass on the loan to the next owner of the building, instead of paying a prepayment penalty. This can also be beneficial for a new owner, as they will not need to go through the entire loan approval process from scratch, and won’t have to order new third-party reports, such as an Appraisal or a Phase I Environmental Assessment.
Not all new owners will want to assume a loan, especially if interest rates have fallen, or if the loan is already a few years into its term (as this will greatly increase the down payment the new owner will have to provide). However, assumable loans (like the Freddie Mac Optigo Small Balance Loan) give a borrower a fantastic exit option in the first few years of a commercial mortgage, when prepayment penalties are high and the new borrower won’t have to contribute an unreasonably high down payment to assume the loan.
Related Questions
What are the requirements for assumable Freddie Mac Small Balance Loans?
The requirements for assumable Freddie Mac Small Balance Loans are lender approval and a 1% fee. This is according to apartment.loans/posts/assumability.
What are the benefits of assumable Freddie Mac Small Balance Loans?
The benefits of assumable Freddie Mac Small Balance Loans include avoiding prepayment penalties, not having to go through the entire loan approval process from scratch, and not having to order new third-party reports, such as an Appraisal or a Phase I Environmental Assessment. Additionally, assumable loans give a borrower a fantastic exit option in the first few years of a commercial mortgage, when prepayment penalties are high and the new borrower won’t have to contribute an unreasonably high down payment to assume the loan. Source
All Optigo Small Balance Loans are fully assumable with lender approval and a 1% fee. Source
Are there any restrictions on assumable Freddie Mac Small Balance Loans?
Yes, there are restrictions on assumable Freddie Mac Small Balance Loans. All Optigo Small Balance Loans are fully assumable with lender approval and a 1% fee. However, if the loan is already several years into its term, assuming a loan may require the new borrower to make a sizable down payment in order to acquire the property, which they may or may not be willing to do.
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What are the advantages of assumable Freddie Mac Small Balance Loans compared to other loan types?
The advantages of assumable Freddie Mac Small Balance Loans compared to other loan types include:
- Non-recourse loans
- Interest-only options
- 30-year amortizations
- Variety of hybrid ARM and fixed-rate options available
- Loans are assumable with approval and 1% fee
- 60-120 day rate locks typically available
- Streamlined application process
- Highly competitive nature of the SBL
- Flexibility nearly unmatched in the multifamily market space
- Compressed costs that create a noticeable difference to borrowers
- Borrowers with credit scores of 650 and above are eligible for the SBL
- Can be utilized for both acquisitions as well as refinances
How can I apply for an assumable Freddie Mac Small Balance Loan?
To apply for an assumable Freddie Mac Small Balance Loan, you will need to contact a lender that offers the program. You can find a list of approved lenders here. The application process is streamlined and the loan is assumable with lender approval and a 1% fee. Additionally, the loan offers a variety of hybrid ARM and fixed-rate options, up to 80% LTV allowance, non-recourse, interest-only options, and 30-year amortizations.