Need second opinion re loan terms

mobile home university
#1

Hi MHU community, I just got a quote from a local community bank on my loan application —see the general terms below. I have some ideas, but would like to hear your inputs (e.g., things you like/dislike) before further talking with the bank.

LTV 70%. $910,000 loan proceeds-- Total loan $925,000 to cover fees etc.

3.95% Adjustable rate-- adjust every 5 years to 3.5% above the 5 yr. Treas.

25 year Amortization

$6,000 Processing Fee.

D/T on property

Assignment of Lease and Rents

Lien/ security agreement on Park owned Mobile Homes.

Proceeds from sale of mobile homes are applied to Principle of the loan

Operating account for the business.

#2

Maybe give a buzz to one of the loan brokers in the space. They will be able to tell you if these terms are competitive, or if they can potentially beat it, for your park.

#3

I see your point. I’m concerned about the interest rate that will adjust every 5 years to “3.5% above the 5 yr. Treas.” That seems to be very high from what I can tell/compare! Curious to see what kind of rates others may have seen lately?

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#4

A recent one for me, similar size, 25 year am, 20 year term, 4.25% with rate adjusting after 5 years to 5-Year Federal Home Loan Bank of Boston Classic Advance Rate +250bp
My others are 5 year terms so I’ll need to refinance at that point. I’d take the adjustable rate after 5 years every time.
Processing fee seems high, unless that includes the appraisal cost. LTV I can usually get 75 or 80. I’d also make see if you could agree to 90% of proceeds from home sales (or some % other than 100)… nice to keep some of that cash if you’re able to.
All in all, pretty good

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#5

Can you refinance in 5 years without paying an early prepayment fee? Depending on where rates are, you may be able to get a lower priced loan at that point in time. However, with this method, your rate would still adjust. Alternatively, can you ask the bank to do a 10 year fixed rate loan?

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#6

All good points. I’ll talk to them to ask for a higher LTV, reduce fees and keep a portion of sales proceeds from POHs. I like the idea of 10 yr fixed rate especially from what we saw the fluctuation of interest rate in the last week or so, and the 10-yr fixed rate was actually quoted before. I was a bit surprised that a few local banks were quite eager to do small loan like this.

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