There’s much going on in the world today as we battle this virus, but within that our real estate business still goes on. Our rental properties still need to be repaired, we still need to pay mortgages or accessing financing among other things.
This is why I want to discuss what I am seeing so far with banks and lenders as all this uncertainty impacts rates and requirements.
The State of Real Estate Lending During COVID-19
My finger is more on the pulse of private lenders, but I have seen enough info in regard to traditional lenders to touch on both.
Rates are rocketing
After being at historical lows just a week ago we are now seeing rates two points higher just like that. Traditional loans are seeing mid 4 percent into the 5 percent area.
Private lenders that were offering 5.5 percent on 30 year loans are now quoting at 7 to 8 percent.
A LOT CAN HAPPEN IN A WEEK!
It’s RISK OFF for the banks as liquidity comes to a grinding halt and the FED steps in to infuse the market from locking up.
Thus the banks are tightening up and raising their risk models to account for a more uncertain time.
Loan to Value Drops
It is not just the rates either. They are dropping loan to value amounts. Most private lenders that offered 75 percent LTV are now quoting at 70 percent.
What’s the next move for us as real estate investors – that is the big question?
Do we grab whatever terms we can get while we can get them or take our chances and see if things return to “normal.”
I can tell you this – I was set to kick off a cash out refinance this coming week on a duplex we just finished renovating. I had all my numbers set and was happy with the returns I was seeing based on the loan I thought I was getting a week ago.
That all changed and my monthly cashflow will be $200 less if I were to go forward with current terms. Being that I own the property outright I’m not up against a wall, though it would be nice to have my money out.
So in regard to the duplex I’m going to take a wait and see approach, sit back and collect rent. Which we also know isn’t a guarantee in current times.
Stay prudent out there my friends!