Multifamily Real Estate Glossary

What is a breakfunding fee in a commercial mortgage?

A breakfunding fee is a penalty for early loan repayment, compensating the lender for lost interest income, calculated based on current market rates versus the loan's original rate.

December 31, 2023

What is an interest guarantee in a commercial mortgage?

An Interest Guarantee in a commercial mortgage obligates borrowers to pay a minimum amount of interest as a prepayment penalty, safeguarding the lender's anticipated yield regardless of early loan repayment.

December 31, 2023

What is a lockout period in a commercial mortgage?

A lockout period in a commercial mortgage is a time-based restriction preventing early loan repayment, ensuring lender income stability, and necessitates careful long-term financial planning by the borrower due to potential subsequent prepayment penalties.

December 31, 2023

How does a step-down prepayment penalty work?

A Step-Down prepayment penalty decreases annually, encouraging longer loan terms while offering borrowers clear, diminishing costs for early repayment.

December 31, 2023

How does a defeasance prepayment penalty work?

Defeasance in real estate financing involves replacing property collateral with government securities to ensure continued payment to the lender, offering risk transfer but often entailing significant costs for the borrower.

December 31, 2023

How does a yield maintenance prepay penalty work?

Yield maintenance compensates lenders for lost interest income through a prepayment penalty based on the net present value of future interest payments, potentially imposing significant costs on borrowers, especially when current interest rates are lower than at the loan's inception.

December 31, 2023

What is a prepayment penalty on a commercial mortgage?

Multifamily loan prepayment penalties, including Yield Maintenance, Defeasance, Step-Down, and others, compensate lenders for lost interest income and vary in structure, impacting borrowers' financial strategies.

December 31, 2023

What is RedIQ used for in Commercial Real Estate?

RedIQ is a platform used for streamlining the analysis and underwriting of multifamily real estate transactions in the commercial real estate sector.

December 28, 2023

What is the sales comparison approach in real estate appraisal?

The sales comparison approach in real estate values a property by comparing and adjusting the prices of similar, recently sold properties in the same area. It is often considered the most reliable and understandable method for residential properties. Here's how it works.

December 28, 2023

What is the income approach in real estate appraisal?

The income approach in real estate appraisal calculates a property's value by dividing its Net Operating Income by a capitalization rate, focusing on its income-generating potential.

December 28, 2023

Still have a question? Contact us

24×7 help from our support staff

Multifamily Real Estate Glossary

What is a breakfunding fee in a commercial mortgage?

What is an interest guarantee in a commercial mortgage?

What is a lockout period in a commercial mortgage?

How does a step-down prepayment penalty work?

How does a defeasance prepayment penalty work?

How does a yield maintenance prepay penalty work?

What is a prepayment penalty on a commercial mortgage?

What is RedIQ used for in Commercial Real Estate?

What is the sales comparison approach in real estate appraisal?

What is the income approach in real estate appraisal?

Make real-time data your competitive advantage!