Assumability for Freddie Mac Small Balance Loans
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If a commercial or multifamily loan is assumable, it can be transferred to a new borrower, allowing the current owner to avoid prepayment penalties. It can also make the property easier to sell, as the new borrower will not have to pay most of the costs of taking out a new loan. 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.
In regards to the Freddie Mac SBL program, all Optigo Small Balance Loans are fully assumable with lender approval and a 1% fee.
Related Questions
What are the benefits of assumability for Freddie Mac Small Balance Loans?
The Freddie Mac SBL program offers a variety of benefits for assumable loans, including the ability to avoid prepayment penalties and the need to order new third-party reports. Additionally, assumable loans can make the property easier to sell, as the new borrower will not have to pay most of the costs of taking out a new loan. Furthermore, assumable loans can provide a great 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.
In regards to the Freddie Mac SBL program, all Optigo Small Balance Loans are fully assumable with lender approval and a 1% fee.
What are the requirements for assumability of Freddie Mac Small Balance Loans?
Freddie Mac Small Balance Loans are fully assumable with lender approval and a 1% fee. This 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. The new owner 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.
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What are the advantages of assumability for Freddie Mac Small Balance Loans?
The advantages of assumability for Freddie Mac Small Balance Loans include:
- Lender approval and a 1% fee
- Avoidance of prepayment penalties
- No need to go through the entire loan approval process from scratch
- No need to order new third-party reports, such as an Appraisal or a Phase I Environmental Assessment
Source: https://apartment.loans/posts/are-freddie-mac-small-balance-loans-assumable and https://apartment.loans/posts/assumability
How does assumability of Freddie Mac Small Balance Loans affect the borrower?
The fact that Freddie Mac Small Balance Loans are assumable is beneficial for borrowers, as they can 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.
Source: https://apartment.loans/posts/assumability and https://apartment.loans/posts/are-freddie-mac-small-balance-loans-assumable
What are the risks associated with assumability of Freddie Mac Small Balance Loans?
The main risk associated with assumability of Freddie Mac Small Balance Loans is that the new borrower may not be able to make a large enough down payment if the loan is already several years into its term. This could make it difficult for the new borrower to acquire the property. Additionally, the new borrower may not be willing to assume the loan if interest rates have fallen since the loan was taken out.
Source: https://apartment.loans/posts/are-freddie-mac-small-balance-loans-assumable and https://apartment.loans/posts/assumability