Floating-Rate Mortgage
Ideal for multifamily mortgage borrowers who want to take advantage of lower short-term rates with prepayment flexibility
Key Benefits
- Offers, in most case, a streamlined, yet still flexible, path to funding, financing solution at our lowest price.
- Borrowers can choose from several options to suit their loan characteristics and needs, including a variety of interest rate cap coverage and prepayment provision options.
At-a-Glance
| Floating-Rate Mortgage Options and Requirements for our Capital Markets ExecutionSM (CME) | |
|---|---|
| Eligible Products | Standard multifamily housing, purpose-built student housing, seniors housing, and Targeted Affordable Housing cash (e.g., LIHTC Year 4-10 and 11-15, Section 8) mortgages; conventional structured transactions. Floating-rate mortgages are not available for cooperative housing. |
| Borrowing Entity |
|
| Loan Size | Generally $5 to $100 million (smaller and larger loans will be considered) |
| Pricing Index | 1-month LIBOR index1 |
| Spread Lock | Early spread lock for 60 or 120 days available; see chart below and related footnotes |
| Loan Terms | 5-, 7-, and 10-year terms |
| Interest-Only Period | Partial-term interest-only and full-term interest-only available; see chart below and related footnotes |
| Interest Rate Cap | Choice of the Freddie Mac Embedded Interest Rate Cap or the borrower may obtain its own cap coverage from a third-party provider; no cap necessary for loans with a loan-to-value ratio of less than 60% |
| Maximum Amortization | 30 years |
| Amortization Calculations | Actual/360 |
| Lockout Period | 1 year if loan has fixed 1% prepayment premium; otherwise, no lockout period |
| Prepayment Provisions | Four prepayment options available (see chart below); no premium for final 90 days |
| Tax & Insurance Escrow | Generally required |
| Replacement Reserve Deposit | Generally required |
| Recourse Requirements | Non-recourse except for standard carve-out provisions |
| Supplemental Loan Availability | Yes, subject to requirements specified in the CME Loan Agreement |
| Application Fee | Greater of $2,000 or 0.1% of loan amount |
Prepayment Provisions1
You can choose from four prepayment provisions when structuring Freddie Mac standard, capped or uncapped floating-rate mortgages. Each option offers no prepayment premium for the last 90 days of the loan term.
| Prepayment Premium | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 |
|---|---|---|---|---|---|---|---|---|
| Option 1 | Locked out | 1% | 1% | 1% | 1% | 1% | 1% | 1% |
| Option 2 | 3% | 2% | 1% | 1% | 1% | 1% | 1% | 1% |
| Option 3 | 5% | 4% | 3% | 2% | 1% | 1% | 1% | 1% |
| Option 4 (for 10-yr capped floating-rate mortgage only) |
7% | 6% | 5% | 4% | 3% | 2% | 1% | 1% |
Loan-to-Value (LTV) Ratios and Amortizing2 Debt Coverage Ratios (DCRs)
| Floating-Rate Base Conventional LTV and DCR3 | (For specific product adjustments, refer to individual term sheet) | ||
|---|---|---|---|
| Amortizing | Partial-Term Interest-Only4 | Full-Term Interest-Only (using amortizing payment) | |
| Acquisitions | |||
| > 5-Year and < 7-Year Term | 70% / 1.05x | Ineligible | 60% / 1.20x |
| 7-Year Term | 80% / 1.05x | 80% / 1.05x | 65% / 1.20x |
| > 7-Year and < 10-Year Term | 80% / 1.05x | 80% / 1.05x | 65% / 1.20x |
| Refinances with No Cash Out | |||
| > 5-Year and < 7-Year Term | 70% / 1.05x | Ineligible | 60% / 1.20x |
| 7-Year Term | 80% / 1.05x | Ineligible | 65% / 1.20x |
| > 7-Year and < 10-Year Term | 80% / 1.05x | 80% / 1.05x | 65% / 1.20x |
| Cash-Out Refinances | |||
| > 5-Year and < 7-Year Term | 65% / 1.10x | Ineligible | 60% / 1.25x |
| 7-Year Term | 75% / 1.10x | Ineligible | 60% / 1.25x |
| > 7-Year and < 10-Year Term | 75% / 1.10x | 75% / 1.10x | 60% / 1.25x |
1 Other options are available for our portfolio execution. Borrowers can contact a Freddie Mac Multifamily Seller/Servicer for more information; Freddie Mac Sellers can contact their Freddie Mac representative.
2 The DCR calculated for the partial-term interest-only and full-term interest-only period uses an amortizing payment.
3 Adjustments may be made depending on the property, product, and/or market.
4 For partial-term interest-only loans, there must be a minimum amortization period of 7 years for loans with terms greater than 7 years. Acquisition loans with 7-year terms may have up to 1 year of partial-term interest-only. For terms of 10 years or more, Sellers should contact their Freddie Mac representative to determine the allowable term of partial-term interest-only.
- Contact Us
- Download the Floating-Rate Mortgage term sheet.
The information in this document is not a replacement or substitute for information found in the Freddie Mac Multifamily Seller/Servicer Guide. Terms set forth herein are subject to change without notice.