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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, 5 Year Interest Only (not available on vacation rentals), 7/1 ARM or 30-Year Fixed rate structure. The 5/1 ARM, 5 Year I/O, 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 2%, yet borrowers have the options to pay more or less points to either buy down their rates or pay as little cash upfront as possible. We go as low as a no point option and as high as the option to pay 5%. Typically, investors looking to hold onto their properties forever will pay 5% or 4% 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 pay no points or 1 point upfront. 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 and no 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.