A Long Story Short: Tens Reasons for Locking into Long-Term Realty Financing
Chicago, Illinois, April 20, 2007 – The yield curve remains inverted, suggesting the looming threat of a recession. However the previous time the yield curve was inverted, a recession did not occur. This phenomenon has proven to be a result of domestic and international investors flocking to longer-term, US debt instruments. The winners, of course, are long-term borrowers. Here’s why:
1). Abundant supply funds and lenders
2). Amortization schedules flexible, including interest-only
3). Best spreads and lowest rates as compared with other terms
4). Ideal for fixed-income, cash flow (e.g., single tenant, credit lease)
5). Nearly all types of income-properties are suitable
6). Long-term protection against inflation and rate increases, as rates are locked
7). Property will be worth more with below-market debt, should interest rates increase
8). Closing costs and bundled third-party fees are competitively priced and spread out over a longer term
9.) Flexible loan payoff provisions are negotiable at an additional charge
10). Various leverage levels provide additional discounts and pricing options
The main risks of locking into long-term debt include: short-term hold/sell strategy, interest rate declines create lower asset values, limited flexibility for additional loan proceeds and restrictive prepayment provisions.
The Real Estate Capital Institute’s advisory board member, John Oharenko, says, “ten-year-term loans are often priced very competitively as compared to shorter-term debt, as mortgage investors prefer longer-term paper.”
The Real Estate Capital Institute (www.reci.com) is an independent research organization exclusively dedicated to studying domestic debt and equity capital markets for commercial and other income properties. Mortgage data for long-term debt covering different property types is also available. On a daily basis, the Institute reports hourly interest-rate updates through the Real Estate Capital Rateline at 7RE-CAPITAL (773-227-4825).
- Contact Information
- Nat Zvislo
- Research Director
- The Real Estate Capital Institute
- Contact via E-mail
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