Mike Taravella and Will Coleman explain what you need to know about loan assumptions.
Key Information:
- Yield Maintenance prepayment penalties are more expensive than step down prepayment penalties.
- The lower the U.S. Treasury rates, the more the expensive the prepayment penalty is for yield maintenance loans.
- Before getting a property under contract, contact the originator of the senior loan to verify the terms and conditions.
- Terms to verify: LTV, maturity date, interest only period, DSCR requirements, replacement reserves.
- Loan assumptions take longer to close than new debt. 75 days is a good estimate.
- Supplemental loans can be used in addition to loan assumptions to gain a higher LTV. Available terms will vary depending on the property and the borrower.
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