Borrowing Smart A Look at Alternative Loan Options

Most borrowers opt for fixed rate loans in today's low-interest market, but for those willing to embrace change and play the field a bit, still-cheaper rates are available. There are state-sponsored loans for making your building more energy-efficient, for example. To shave percentage points off a loan for other purposes, there's the so-called London Inter-Bank Offered Rate (LIBOR)-based rate. Or you might consider looking into the new adjustable-then-fixed rates from Fannie Mae.

While Fannie Mae's product is new, LIBOR-loans have been around awhile and are experiencing new popularity, and state-sponsored energy loans are gaining popularity through sheer word-of-mouth.

Not Your Father's Loans

But are co-op and condo boards embracing these new ways of borrowing? Should they embrace them? Perhaps because of their lack of experience (be it real or perceived), co-op owners are notorious for being fiscally conservative; and with interest rates as low as they've been in recent years, the conservative choice often seems a good one - to both borrowers and many lenders.

"You can get a ten-year loan right now for 6.25 [percent interest]. So why wouldn't you take a fixed-rate deal and know where your money is going to be?" asks Thomas Schissler, vice president of American Property Financing, Inc. in Manhattan. "For my money, whenever anybody asks me, I'm selling people fixed-rate product."

A simple product, at a good rate, is often simpler to agree upon, too. Explains Steven Heller, regional senior vice president of Arcs Commercial Mortgage Co., "Co-ops are slow to make up their minds. It's management by board of directors and finance. There are very few people who pull the trigger with the very first [loan] meeting."

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