20 year fixed @ 6% or 5/5 year ARM (25 year term) with 1st 5yr lock at 4.5% and 25yr am (adjustments are FHLB 5 year fixed + 250bps)
Thoughts??
Depends on your planned hold period. What is the difference saved in the first 5 years of the loan? Are the loan costs the same for each?
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Assume long-term (indefinite, 10yr+) hold and same costs for both.
@mhp I think its a tough call weighing these two. I was going to comment but really for me on this, i could go either way. I like the certainty of the 20 year but then you got it pinned up against a longer term but the uncertainty of rate increase.
Do you have any preference on carrying debt, or don’t really mind either way?
Additionally, any value add component here where you might be looking to refi at some point since you increased the value?
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I like consistency and would take the fixed rate then.
This is a big issue that would sway me to the lower rate shorter term.
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What is the purchase price of the MHP? If it is over $1.33MM then the term sheet they have given you is only “OK”. I would be surprised if they actually closed the loan at 4.5% considering the adjustment they are offering would be at 5.25% (today). Usually the today rate and adjustment are more inline with each other. I am also assuming that they will want a full recourse guarantee on the loan. That said I don’t do a lot of “bank” deals, so you may have been able to negotiate better than my assumptions. I only deal in non-recourse financing with minimum loan size of $1MM max 75% leverage. If your purchase price if over the minimum then pricing today on a 10/30 at 75% LTV would be around 4.9%. You can also recap this loan up until the last 3 years, and we have multiple interest only options. The lower the leverage the lower the pricing. Also, deals over $3MM get an additional 5bps off that rate. If you think your park would qualify give me a call 801-599-1878 Aubrey Matthews