There are a variety of apartment mortgage products that can be used for the finance or refinance of multifamily properties throughout the US. Some of these products require previous experience while others are perfectly suitable for first-time investors. The type of loan available to any given borrower will be dependent on several underwriting factors, which are explained on the individual apartment loan product pages. Below is an overview of current multifamily interest rates, updated daily.
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Multifamily properties like apartment buildings, student housing, senior living facilities, and manufactured home communities require large commercial loans to finance acquisition, refinancing, or new construction. Multifamily mortgage rates fluctuate daily based on broader market conditions.
In this comprehensive guide, I’ll explain how multifamily loan rates work, provide examples of current interest rates, and discuss how to get the best multifamily financing rate for your property.
How Do Multifamily Mortgage Rates Work?
Most multifamily loans are variable rate loans tied to a benchmark rate like the Prime Rate or LIBOR. Lenders add a spread or margin on top of the index to determine your overall interest rate.
For example, Prime Rate is currently 4.75%. A lender may offer 5 year adjustable rate financing at Prime + 2.25%. This would equate to a 7% interest rate today.
Spreads factor in variables like
- Your financial strength and real estate experience
- Property location and asset class
- Loan-to-value ratio and debt service coverage ratio
- Additional risk factors
Stronger borrowers can qualify for lower spreads, Rate locks allow you to lock in a spread for 30 to 180 days,
Today’s Multifamily Interest Rates
Multifamily mortgage rates change daily, but here are general ranges for common loan programs:
Agency Loans
- Fannie Mae: Prime + 1.75% to 2.5%
- Freddie Mac: Prime + 1.5% to 2.25%
CMBS Loans
- 5 Year Loan: LIBOR + 2.5% to 3.5%
- 10 Year Loan: LIBOR + 2.75% to 3.75%
Regional Bank Loans
- 5 Year ARM: Prime + 1.5% to 3%
- 7 Year ARM: Prime + 1.75% to 3.25%
Life Company Loans
- 5 Year Fixed: 4.5% – 5.25%
- 7 Year Fixed: 4.75% – 5.5%
- 10 Year Fixed: 5% – 5.75%
Actual rates depend on the factors mentioned earlier. Work with an experienced multifamily loan broker to determine your rate based on your unique situation.
Comparing Fixed vs. Adjustable Rate Loans
Most multifamily loans come in two flavors – fixed or adjustable rate. Here’s an overview of how they work:
Adjustable Rate Loans
- Interest rate floats and adjusts periodically (usually annually)
- Payments fluctuate over time as rate adjusts up or down
- Lower initial rate than fixed rate loans
- Rate capped each adjustment period to limit spikes
- Better for shorter term loans (up to 7 years)
Pros
- Lower initial rate
- Rate can go down if index drops
Cons
- Unpredictable payment amounts
- Risk of rate spiking significantly
Fixed Rate Loans
- Interest rate remains the same for full loan term
- Fixed principal and interest payment amount
- Typically higher rate than adjustable loans
- Best for long-term loans (7+ years)
Pros
- Predictable payments
- Rate stability
Cons
- Higher rate than adjustable loans
- Cannot refinance if rates drop
Evaluate both options and run the numbers to see which works best for your business plan.
How to Get the Best Multifamily Mortgage Rate
As a commercial real estate investor, your goal is to secure competitive multifamily financing at the lowest possible interest rate. Here are some tips to get the best rate:
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Increase your down payment – Lenders offer better rates for lower LTV loans. Put down 20-30% if possible.
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Improve your financial position – Rates improve as your net worth, income, and credit score rise.
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Show experience – Multiple successful multifamily investments help you qualify for better loan terms.
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Explore loan programs – Compare agency, bank, CMBS, and alternative lenders for the best rate.
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Shop multiple lenders – Apply with several lenders to create a competitive bidding process.
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Consider recourse – Offering recourse can help you get cheaper financing.
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Lock early – Lock in your rate as early as possible, especially in rising rate environments.
With the right strategy, you can secure very favorable multifamily interest rates – even with today’s rising rates. Partner with an expert advisor to optimize your financing.
Frequently Asked Questions
Below are answers to some common questions about current multifamily mortgage rates and how they work:
How often do multifamily rates change?
Multifamily interest rates can change daily, since most products are tied to indexes like Prime Rate, LIBOR, or Treasury yields. Expect frequent rate fluctuations.
Which is better – fixed or adjustable rate?
It depends on your business plan. Adjustable rate loans start lower but have unpredictable payments. Fixed rate loans have stable payments but cost more upfront.
How high will multifamily rates go?
It’s impossible to predict, but most experts expect continued increases in 2023 due to Fed rate hikes. Lock in early to avoid volatility.
What credit score is needed for the best rates?
Most lenders want to see a 680+ FICO score and solid financials to qualify borrowers for their lowest rates.
How much does refinancing save with lower rates?
Exact savings depend on the spread between your old and new rate. A 0.5% drop could save tens of thousands in interest over a loan’s term.
Can I buy points to lower my multifamily rate?
Yes – expect each 0.25% rate reduction to cost 1-2% of the loan amount in upfront points. Do the math to see if it pencils out long term.
Be sure to take note of today’s multifamily rates when putting together your financing strategy. With the right lender, you can still lock in favorable interest rates to maximize returns on your apartment building investment.
What is Multifamily Lending?
Multifamily lending is the equivalent of apartment lending. Multifamily loans are made on properties that have at least 5 apartment units and are zoned commercially, whereas single family loans are made on properties with 4 units or less. If a property has a commercial component (i.e. retail store) and 4 units or less, the property would be considered “mixed use” and would need to be financed on a commercial loan rather than a multifamily loan.
Current Apartment Loan Interest Rates and Terms
Although interest rates depend on the underwriting of the property’s location, LTV, DSCR, borrower’s experience and financial strength, as well as any required loan features, below are interest rates that are representative of good-quality apartment complexes in major markets with strong borrowers. However, keep in mind that because several underwriting factors affect final pricing, actual interest rates may be higher or lower than what is listed below.