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Apartment Loans Secrets
2 min read
by Content Team

Does the Freddie Mac Small Balance Loan Program Offer Fixed Interest Rates?

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Fixed Rate Loans and the Freddie Mac SBL Program

The Freddie Mac SBL program offers both fixed-rate and hybrid adjustable-rate mortgages. Fixed-rate Small Balance Loans are offered in 5, 7, and 10-year options, and hybrid ARM loans are offered as 20-year loans with 5, 7, or 10-year fixed-rate periods. All loans (both fixed-rate and hybrid ARMs) generally come with a 1-3 year interest-only (I/O) period at the beginning of the loan term, based on the length of the fixed-rate period.

Loans with a 5-year fixed-rate period come with a 1-year I/O period, loans with a 7-year fixed-rate period come with a 2-year I/O period, and loans with a 10-year fixed-rate period come with a 3-year I/O period. However, for loans in Small or Very Small Markets, this is reduced to a 0-year I/O period for loans with a 5-year fixed-rate period, a 1-year I/O period for loans with a 7-year fixed-rate period, and a 2-year I/O period for loans with a 10-year fixed-rate period.

Interest-only periods can generally be added or subtracted for a 0.4% addition or subtraction per year. For instance, a borrower with a 5-year fixed-rate loan with a 5% interest rate could extend their I/O period to 2 years, but to do so, they would need to pay an elevated interest rate of 5.4%. In contrast, the borrower could save money on interest payments by eliminating their I/O period altogether, and would only pay an interest rate of 4.6%. Adding I/O periods may not available for properties in Small and Very Small Markets.

The Freddie Mac SBL program also offers full-term interest-only loans, though these are held to stricter LTV and DSCR requirements. In Top Markets, full-term I/O loans are still permitted up to 80% LTV, but require a 1.35x DSCR, in Standard Markets, they are allowed up to 65% and require 1.40x DSCR, in Small Markets, they are allowed up to 60% LTV and require 1.40x DSCR, and in Very Small Markets, they are allowed up to 65% LTV but require a 1.50x DSCR.

Related Questions

What are the requirements for the Freddie Mac Small Balance Loan Program?

The Freddie Mac Small Balance Loan Program permits loan sizes between $750,000 and $7.5 million. Additional requirements for loans under $1 million include:

  • Loans must be in a Top Market or Standard Market
  • Eligible borrowers include:
    • Previous Freddie Mac Multifamily borrowers
    • Borrowers taking out multiple loans simultaneously
    • Borrowers who will are likely to engage Freddie Mac for 2+ additional loans within the next 12 months
    • Borrowers with significant multifamily experience in the area (2+ years local multifamily experience and 2+ multifamily properties owned)
    • Loans that were initially approved for $1 million+ but were later constrained by property NOI or other factors
  • Properties must underwrite a vacancy of at least 5% and an expense ratio of at least 30%
  • 10-15 bps will be added loans in Top Markets, while 15-20 bps will be added to loans in Standard Markets
  • Cash-out refinances for these loans are typically subject to stricter leverage requirements (LTV/DSCR)
  • Seller/servicers may not market Small Balance Loans less than $1 million
  • Freddie Mac generally requires 3 additional business days for commitments and inspections

Additional requirements for loans over $6 million include:

  • Loans must be in a Top Market or Standard Market
  • Can have no more than 100 units
  • Will require a borrower to order additional third-party reports, including a survey report and a zoning report
  • Minimum DSCR of 1.25x
  • Require that borrowers form a Single Asset Entity (SAE)

During the underwriting process, a lender decides whether offering a loan to a borrower is a suitable risk, based on their estimated ability to repay. When examining a commercial loan application, lenders generally look at credit, capacity, and collateral-- often referred to as the “three C’s” of underwriting. In terms of credit, borrowers for the Optigo Small Balance Loan program will usually need to have a FICO credit score of at least 650. Capacity, which is defined by DSCR, varies between 1.20x (for amortizing loans in Top Markets) to 1.50x (for full-term interest-only loans in Small Markets). Since Small Balance Loans are non-recourse, the property itself is generally considered to be sufficient collateral for the loan.

What types of loans are available through the Freddie Mac Small Balance Loan Program?

The Freddie Mac Small Balance Loan Program offers fixed-rate, floating-rate, and interest-only loan options with a variety of term lengths and amortization periods. Rates are slightly lower for borrowers in the program's top markets, like New York City or Los Angeles, while being higher for borrowers in so-called Standard, Small, and Very Small markets. The program also offers an early rate lock option to avoid interest rate risk.

In addition, the Small Balance Loan program offers loan amounts between $1 million and $7.5 million, with LTVs up to 80% and DSCRs as low as 1.25x. The program also offers a wide selection of fixed and variable rate terms from 5 and 20 years, with 30-year amortizations.

The Small Balance Loan program also operates by region, with unique interest rates available in each. There are 5 regions in total which are the Northeast, Southeast, North Central, South Central, and finally the western region.

What are the advantages of the Freddie Mac Small Balance Loan Program?

The advantages of the Freddie Mac Small Balance Loan Program include:

  • Up to 80% LTV allowance
  • Streamlined application process
  • Loans are non-recourse
  • 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
  • Flexible loan sizes, starting at just $750,000 and going up to $7.5 million
  • Low interest rates, starting from just 4.51%
  • High leverage, up to 80% LTV
  • Generous DSCR minimums, as low as 1.20x
  • 30-year amortizations, keeping payments low for borrowers
  • Partial and full-term interest-only loans offered
  • Cash-out refinancing offered for eligible borrowers
  • Multiple fixed rate term options (with up to 10-year terms) and hybrid ARM options (with 20-year terms)
  • Soft step-down prepayment penalties allowed
  • 60-120 day rate commitments offered
  • Loans are fully assumable with 1% fee and Freddie Mac approval
  • Financing is non-recourse (with individual exceptions for certain loans)

What are the eligibility criteria for the Freddie Mac Small Balance Loan Program?

The eligibility criteria for the Freddie Mac Small Balance Loan Program includes a FICO credit score of at least 650, a Debt Service Coverage Ratio (DSCR) of 1.20x (for amortizing loans in Top Markets) to 1.50x (for full-term interest-only loans in Small Markets), and the property itself is generally considered to be sufficient collateral for the loan. Additionally, loans above $6 million are generally only permitted in Top & Standard Markets, can have no more than 100 units, and will require a borrower to order additional third-party reports, including a survey report and a zoning report. Finally, loans of more than $6 million also require a minimum DSCR of 1.25x, and require that borrowers form a Single Asset Entity (SAE).

For more information, please visit:

  • Underwriting for Freddie Mac Small Balance Loans
  • Freddie Mac® SBL Program
  • Freddie Mac Small Balance Loans Between $6 Million to $7.5 Million: What You Need to Know

What are the interest rates for the Freddie Mac Small Balance Loan Program?

The interest rates for the Freddie Mac Small Balance Loan Program vary depending on the market tier and loan term. According to apartment.loans/posts/interest-rates, the rates for the Western region are as follows:

Market Tiers 5-Year Hybrid 7-Year Hybrid 10-Year Hybrid 5-Year Fixed 7-Year Fixed 10-Year Fixed
Top Markets 4.08% 4.27% 4.42% 4.23% 4.57% 4.47%
Standard Markets 4.56% 4.52% 4.66% 4.71% 4.67% 4.76%
Small Markets 4.85% 4.71% 4.9% 4.9% 4.86% 4.95%
Very Small 5.06% 4.90% 5.06% 5.11% 5.05% 5.11%

In addition, according to www.multifamily.loans/freddie-mac-small-balance-apartment-loans, the loan terms for the Freddie Mac Small Balance Loan in 2023 are as follows:

  • Loan Amount: $1 million minimum, $7.5 million maximum
  • Loan Uses: Acquisitions or refinances
  • Loan Terms:
    • 20-year hybrid ARM with initial 5, 7, or 10-year fixed-rate period, OR
    • 5, 7, or 10-year fixed-rate loan
    • ARMs typically based on 6-month LIBOR with up to 1% rate adjustments every 6 months. Lifetime cap set 5% over starting rate.
  • Amortization: Up to 30 years, partial interest-only options available, full-term interest-only options may also be available in certain circumstances.
  • Interest Rates: Vary, but lower for properties in Top and Standard Markets and higher for properties in Small and Very Small Markets
In this article:
  1. Fixed Rate Loans and the Freddie Mac SBL Program
  2. Related Questions
  3. Get Financing
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