Apartment Loan Terms – What You Need to Know

Apartment loan terms are a key factor in the success of any multifamily property investment. Whether it’s for construction or value-add renovation, investors must take the time to understand their options and select the best financing structure.


Government-backed apartment loans, such as Freddie Mac’s Small Balance Loan program and Fannie Mae’s Multifamily Small Loan program offer favorable rates and long-term, fully amortizing loan terms.

Interest Rates

The interest rate associated with an apartment loan depends on the type of financing you choose. Bank loans tend to have higher rates than government-backed options such as Fannie Mae, Freddie Mac, or CMBS loans. You should always keep an eye on current apartment mortgage rates to make sure you are getting the best deal possible.

CMBS and conventional apartment loan rates are usually tied to an index plus a spread. These rates are updated daily. Using our new Chrome extension, you can easily view the current apartment loan indexes and rates.

Government-backed multifamily financing offers some of the lowest interest rates in America. These loans are also non-recourse, meaning that the lender can’t pursue your personal assets if you default on the debt. This is a great option for investors looking to buy and renovate affordable or luxury apartments.

Another great option is a hard money multifamily loan. These loans typically have a lower minimum down payment and DSCR requirement than traditional bank balance apartment loans. However, hard money lenders will usually require two years of property investor experience to qualify for the financing. Additionally, hard money loan terms are generally shorter than bank balance apartment loans – about 30 years vs. the typical 40 or 50-year loan term of a conventional mortgage. This makes them a good choice for investors who want to shorten their term and save on interest costs.

Down Payment

A typical apartment loan requires a down payment of 20%, but the amount may be higher in some cases. In addition to this, buyers are required to provide extensive documentation as part of the application process. This includes current lease agreements, property management agreement, tax bills, insurance policy declaration pages and more. Additionally, lenders also ask for extensive credit and employment details.

There are several financing options for multifamily properties, including commercial mortgage-backed securities (CMBS), government agency loans, and bank balance sheet loans. Each type of financing has its own requirements and benefits, but the choice ultimately comes down to how well the borrower qualifies and how long they plan to hold the property.

Generally, government agency-backed loans like Fannie Mae and Freddie Mac are ideal for investors who want an easy application process with a low down payment and affordable interest rates. These loans are typically nonrecourse and can be used for affordable housing developments, student housing, senior independent living, manufactured homes, and cooperatives.

For those who don’t qualify for a government agency loan, conduit financing is another option. These are typically easier to qualify for than traditional bank mortgages, but they do come with higher fees and are usually only available to experienced investors. They’re often used for smaller deals and can be layered on top of a Fannie Mae or Freddie Mac loan to maximize leverage.


Apartment loan amortization refers to how a borrower’s monthly payments are distributed over the term of the loan. Typically, the instalments start out lower but increase over time. This helps people who may have limited financial capacity at the beginning of their mortgage to get into a home without having to pay more than they can afford.

Borrowers can use a multifamily mortgage calculator to find out how much their monthly repayments will be over the length of their loan term. The calculator will also give them a breakdown of their total costs. For example, they will be able to see how much their property taxes will be and their insurance premiums. The calculator will also tell them how long they have to repay their loan and how many years they will be able to carry it over.

When it comes to financing a multifamily investment, there are many different options available to investors. Some of the most popular options include bank, agency, HUD, and conduit loans. These loans offer a variety of benefits, including non-recourse financing, fixed rate terms, and 80 percent leverage. It is important to note that some types of financing will require reserves and prepayment penalties. However, these fees are often less than what a borrower would face in an alternative financing situation.


In addition to interest rates and amortization, apartment loan terms usually have specific tax implications. Borrowers should be familiar with these implications before executing a multifamily finance transaction.

For example, a borrower may need to provide detailed rental roll documents that show past and current tenant data such as lease amounts, tenant names, unit numbers, bed and bath counts, and security deposit amounts. The rent roll provides insight into the potential future cash flow based on these existing tenant data. It can be a critical factor in determining the property’s net operating income (NOI), which is used to pay the loan’s interest charges.

Other considerations include strict occupancy requirements, which can be imposed by lenders to protect them against defaults caused by delinquencies or other factors. Lenders also usually require extensive documentation in the form of property management agreements, tax bills, and insurance policy declaration pages. Experienced multifamily investors may also be able to secure non-recourse apartment financing, which uses only the financed property as collateral in the event of a default.