Like single-family homes, condominium units tend to be owner-occupied. Financing for these units therefore tends to follow traditional guidelines and requirements centered on owner occupancy. But what happens when a condo unit is held as an income-producing investment? Is financing still available? The answer is yes.
Availability of Financing
Investor units generally fall into two groups: single units and blocks of units. According to Eddie Hoskins, president of First Florida Financial Group LLC, a mortgage brokerage company in Fort Myers, Florida, “individual condo units which are held for investment are financeable at terms very similar to owner-occupied units.” Joelle Maximilien-Miller, MBA, senior loan officer at RK Mortgage Group Inc. in Hallandale, Florida, concurs and adds, “Rates may vary though, as they are substantially based on credit score and whether the condominium is non-warrantable.”
Loan availability in the New York area seems to follow the same pattern. According to Barry Korn, CFA, managing director of the New York City-based Barrett Capital Corporation, financing for these types of investments are available. “The process is similar,” he says. “Purchases are straightforward in that you have standard criteria relative to LTV [loan-to-value], debt-to-income, and housing expense ratios. With respect to financing an investment condo, there are additional considerations relative to the ability of the borrower in the event of difficulties.”
“FNMA [a.k.a. “Fannie Mae”] loans are available today at an interest rate in the upper 4 percent range for a 30-year fixed rate mortgage at a loan-to-value ratio of 80 percent,” Hoskins says. An additional requirement for investment condos “is that no more than 49 percent of the units in the complex can be investor units or held as second homes.”
Korn says that in his experience, the basic structure is similar to conventional financing. “But while LTV of up to 75 percent is available,” he adds, “the cash flow from the investment condo often limits the funding to 30 percent-40 percent of LTV. Rates are slightly higher for investment condos compared to loans for primary residences. Currently you are looking at 5 to 7-year rates in the 3.5 percent-4 percent range. Amortization is up to 30 years.”