Are you a multifamily property owner looking to refinance? Refinancing can be a great way to take advantage of better interest rates, free up cash, and improve your cash flow. But with so many options available, how do you choose the best one for your 24-unit multifamily property? In this blog post, we'll discuss the two most popular refinancing options: agency debt and bank loans.
Understanding Your Refinancing Options
Before we dive into the specifics of agency debt and bank loans, let's briefly discuss what refinancing is and why you might consider it.
Refinancing is the process of paying off your current mortgage with a new one that has better terms, such as a lower interest rate, longer repayment period, or more favorable payment structure. Refinancing can help you save money, reduce your monthly payments, or free up cash for other investments or expenses.
There are many different types of refinancing options available, including agency debt, bank loans, private loans, and more. Each option has its pros and cons, and the best one for you will depend on your specific situation, goals, and financial standing.
Agency Debt vs Bank Loans
When it comes to refinancing a multifamily property, two of the most popular options are agency debt and bank loans. Here's a brief overview of each option:
Agency Debt
Agency debt is a type of loan that is backed by government-sponsored entities like Fannie Mae or Freddie Mac. These loans typically have lower interest rates, longer repayment periods, and non-recourse terms, which means that the lender can't go after your personal assets if you default on the loan. Agency debt also has less stringent underwriting requirements than traditional bank loans, making it easier to qualify for.
Bank Loans
Bank loans are loans that are provided by traditional banks or credit unions. These loans typically have higher interest rates, shorter repayment periods, and require personal guarantees or collateral. Bank loans also have more stringent underwriting requirements than agency debt, making it more difficult to qualify for.
Choosing the Best Option for Your Multifamily Property
So, which option is the best for your 24-unit multifamily property? As Beau Eckstein, a lending industry expert, explains in the video, the best option will depend on your net worth, experience, and specific goals.
If your net worth is equal to or greater than the loan amount, and you have experience with multifamily properties, agency debt may be a good option. This type of loan typically has better terms, less stringent underwriting requirements, and non-recourse terms.
However, if you don't mind signing a personal guarantee and are willing to go through the more stringent underwriting process, a bank loan may also be a good option. Bank loans typically have higher interest rates but may offer better terms depending on your specific situation.
Ultimately, the best way to choose the right refinancing option for your multifamily property is to work with a lending industry expert who can help you compare your options and choose the one that best meets your needs.
Conclusion
Refinancing your 24-unit multifamily property can be a great way to improve your cash flow, reduce your monthly payments, and take advantage of better interest rates. Whether you choose agency debt or a bank loan will depend on your net worth, experience, and specific goals. By working with a lending industry expert, you can compare your options and choose the one that's right for you.