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Floating Rate Commercial Mortgage Loans
Floating interest rate loans represent any type of loan or mortgage that has an interest rate which is generally fixed for a period of time, after which it can change throughout the term of loan, usually at preset time periods. These loans are also referred to as variable or adjustable rates.
The most common market indices used are Prime Rate, London Interbank Offered Rate (LIBOR) and the Treasury Index (T-Bill). Principle Commercial loans are typically indexed to the LIBOR, which is the interest rate that banks charge each other for loans, the 5-year T-Bill and the 10-year T-Bill.
There are several advantages when choosing a floating rate commercial loan:
- To take advantage of an initial lower interest rate at the start of the loan along with the historically low interest rates of the past few years.
- There will usually be a cap on the maximum interest rate that can be charged by the Lender.
- This loan type may also prove to be easier to obtain, as the Borrower is assuming more risk than the Lender.
- The lower initial interest rate may also Qualify the Borrower for a larger loan amount.
- Floating rate loans often feature minimal or no prepayment penalties.
- They are particularly attractive to buyers with a two to four year financing horizon, such as acquisition of a property, repositioning a company, or a turnaround.
Principle Commercial can help borrowers exploit these flexible structures to strengthen their long-term business strategy.
Let our expert Account Executives help you decide if the flexibility of a floating rate loan is best for your business strategy.
Principle Commercial offers adjustable rate commercial mortgage loans on a variety of commercial property types.
Do you have questions about floating rate loans?
Please Contact Us and an Account Executive will be in touch with you shortly.
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