Commercial Long Term Debt Finance 
Long term real estate debt financing markets in the US provide a wide range of options from many providers. Typically, longer loan terms, more flexible conditions are available than what is available in Australia.

It is also the case that many terms that seem familiar to Australians operate differently in the US.

Most significantly for Australian investors considering the operation of US property debt finance to key areas of consideration are: 

Loan to Value (LTV) - In the US the LTV is a ratio used by the lender to assess its risk before approving a mortgage. Typically, assessments with high LTV ratios generally carry a higher interest rate.

In Australia lenders use a similar assessment known as the Loan to Valuation Ratio (LVR). US lender's application of this calculation varies to that of their Australian counterparts, because unlike the majority of Australian lenders, in the main US lenders do not have the ability to recalculate the LTV, until loan maturity.

Debt Coverage Ratio (DCR), US lenders typically focus closely on the amount of cash flow available to meet annual interest and principal payments on debt, including sinking fund payments.

Typically lenders require a DCR over 1. That would mean the property is generating enough income to pay its debt obligations.

Multifamily Apartment Loan providers

Fannie Mae and Freddie Mac Financing

Fannie Mae financing is available nationwide in primary and secondary markets. These loans are for stabilised properties with rates that can be fixed or floating. Maximum leverage is 80% on purchases and 75% on refinances within designated areas. Loans are typically non-recourse.

FHA Financing - HUD Multifamily Financing

The Federal Housing Authority (FHA) guarantees these mortgages under the authority of the Department of Housing and Urban Development (HUD), making them available nationwide. This US Government insured debt is low fixed rate, long term (up to 35 years), non-recourse and financial covenant free. Typically the loan programme which apartment investors focus on the 223(F) HUD mortgage insurance programme. This programme involves the US Government providing insurance to the financial institution which makes the loan. This acts as security for the loan in addition to the secured property as such these loans, they are always non-recourse, except standard carve-outs.

Conduit / CMBS Loans

Conduit / CMBS loans are securitised loans that are pooled and sold on the secondary market. Typically they are available nationwide in all markets and are available for stabilised properties. CMBS multifamily loans are typically only for traditional multifamily complexes or independent senior living communities. Maximum leverage is 75% on both purchases and refinances and loans are always non-recourse.

Commercial Real Estate Insurance Mortgages


Insurance mortgages are a type of portfolio loan that is typically funded by a life insurance company and offer the best rates and longest terms in the industry.

Post the Global Financial Crisis these types of loans became more difficult to secure, however this situation is now changing as life company’s re-enter the market. Minimum loan amounts may vary based on the programs, but most products have a $5-10 million loan minimum. Insurance loans are typically the best fit for low leverage, high-performing buildings that are B class or greater and no more than 15 years old. Insurance mortgages are available in non-recourse form.