The recent spike in interest rates shows no signs of slowing down. However, we know that the applications we are evaluating today will not close a permanent mortgage loan for at least 18-24 months – a long period of time during which the rate environment may once again change.
While everyone’s crystal ball is fuzzy at best, Centrant Community Capital is working to develop new pricing options that will allow our borrowers to capture the benefit of a potential drop in interest rates. That’s why we’re pleased to offer our newest product: a floating forward rate commitment.
Here’s how it works:
- Centrant issues a 24-month forward commitment for a permanent loan, with a floating rate commitment rather than our standard rate lock.
- The floating rate range is set at 50 basis points above, and 100 basis points below, our standard rate at the time the commitment letter is issued. In other words, you receive a built-in rate cap and floor at no additional cost.
- Your permanent mortgage rate will be calculated at the time of conversion. However, for a 1% fee, you can choose to lock in your rate any time after receipt of your certificates of occupancy.
Why pursue a floating rate commitment?
In the current rate environment, we believe that this approach allows you to proceed with the certainty of a competitive maximum rate commitment, and the ability to capture meaningful rate reductions, as efficiently as possible and at minimal cost to you.
If you prefer a fixed forward perm rate commitment, we are still offering that via our standard pricing model. But even then, you can elect to purchase our interest-rate float down option of up to 50bp to capture a smaller rate reduction benefit prior to perm loan conversion.
Affordable housing development is a challenging business. At Centrant, we strive to be the easiest part of your development process. Want to learn more about any of these pricing options? Check out our product term sheet, or contact us today!