Freddie Mac Small Apartment Loans - Interest Only Options

Freddie Mac Small Balance Apartment Loans (SBL) provide partial and full fixed term interest only options for qualified properties. The interest only term depends on:

• Property location (Freddie Mac Market Tiers)
• Fixed term (5, 7 or 10-year fixed term options)
• LTV
• DSCR

In general, loans with an LTV below 60%-65% and a DSCR above 1.35-1.50 are eligible for interest only payments during the entire fixed term of the loan. Loans where the DSCR or LTV are outside of these parameters are eligible for partial term interest only payments, or ineligible based on Market and length of fixed term.

The Freddie Mac SBL Program offers some of the most aggressive interest only payment options for apartment loans in the market. Interest only payment options are a great option for borrowers looking to increase cash flow. It's important to understand that while interest only payment options increase property cash flow to the borrower, for underwriting purposes the DSCR is based on a fully indexed payment (principal and interest). i.e. selecting an interest only option will not help the property qualify for a larger loan.

For properties eligible for full term interest only, the Fannie Mae Small Apartment Loan program may be a better option as Fannie Mae’s add on to the standard rate for full term interest only is much less than Freddie Mac’s.