· Education · Sayasone Phongvichith
Fixed or ARM? How the rental loan structures work
The rental loan comes as a 30-year fixed or as a 5/6, 7/6 or 10/6 ARM, with partial interest-only on every structure. Here is how to think about the choice.
When a rental qualifies, the next question is how the loan is set up. Our Rental Loan has a 30-year term. You pick the structure.
The options
- 30-year fixed.
- 5/6, 7/6 or 10/6 ARM. An ARM is an adjustable-rate loan. The first number is usually how many years the rate stays fixed. The second is how often it adjusts after that, in months. Our program page lists the options but not the adjustment terms, so ask us for the details when you get a quote.
- Partial interest-only is available on every structure.
Rental Portfolio, for 2 to 10 properties, has the same options.
How to choose
- How long will you hold the property? A long hold gives you more reason to want one fixed payment for the whole term.
- How much certainty do you need? A fixed payment stays the same. An ARM can change after its fixed period ends.
- Will you refinance before the fixed period ends? If you will, the later adjustment matters less. Check the prepayment options before you count on that.
- Do you want partial interest-only? It can lower the early payment. It also changes how fast the balance comes down.
Structure and DSCR
DSCR is the monthly in-place gross rent divided by the monthly PITIA. PITIA includes principal and interest, so the structure you pick changes the payment. Ask us which payment we use for your structure before you count on a result.
What to send us
The property, the leases, the entity and guarantor documents, and the structure you want quoted. Send it as a scenario. It is a preliminary inquiry only. Pricing is quoted per deal.
Program figures are indicative only and subject to complete documentation, underwriting, appraisal and final credit approval. This post is general information, not financial or legal advice.