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What to Know About Loan Assumptions

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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Contact Information:

will@randcre.com

miket@randcre.com

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