Share This Post:
At Visio Lending, we are very proud of how our loan programs can be tailored to meet the needs of our investor clients and their investment strategies. We categorize our investors' strategies into three main buckets: permanent rental, transitional rental, and vacation rental. Essentially, the permanent rental is the property you hold onto forever, the transitional rental is the property you sell based on market conditions, and the vacation rental is the short-term rental. Within these strategies, you can customize your loan to best fit your needs. Here are three ways to tailor your loan program to your strategy:
Pick from a 5/1 ARM, 7/1 ARM or 30-Year Fixed rate structure. The 5/1 ARM and 7/1 ARM tend to be best for investors looking for the flexibility to sell their properties within 5 to 7 years. The 30-Yr fixed rate structure tends to be our “set it and forget it” option.
Our standard origination fee is 1%, yet borrowers have the options to pay more to buy down their rates or stay with the standard to pay as little cash upfront as possible. Typically, investors looking to hold onto their properties forever will pay a higher origination fee in order to get their rates as low as possible. Even with the greater amount of money spent upfront, these borrowers save money over time. On the other hand, borrowers looking for the flexibility to sell the property based on market conditions, will opt for the standard origination fee. Although these borrowers have higher monthly rates, if they sell the property within a few years, they will still come out ahead by keeping their upfront costs down.
A prepayment penalty is a contractual clause that states the borrower is going to pay the lender an additional fee if the borrower pays off the loan early. At Visio Lending, our standard prepayment penalty option is a 5/4/3/2/1 structure. This means that if the borrower pays off the loan in year one, they pay a 5-point penalty, in year two, a 4-point penalty, and so forth. For the borrower looking to hold onto the property long-term, this does not affect them at all. However, for our borrowers looking to sell the property within five years, we offer 3-year prepayment penalty options. The borrower will get a higher interest rate for selecting these options, yet they will still come out ahead when they sell the property.
Ultimately, the rate structure, origination fee, and prepayment penalty that are best for you depend on your investment strategy. Our Account Executives are extremely knowledgeable and are always happy to help guide you through scenarios. Interested in learning more or ready to get started on your loan? Contact us.
Editor's Note: This post was originally published in July 2019 and has been updated in August 2020 for freshness and accuracy.