Multifamily Loan Pricing: Spreads, Fannie DUS vs. Freddie Optigo, and Prepayment
You already know the coupon is index plus spread. The useful question is what moves the spread on your deal, which agency executes better, and what the prepayment structure will cost you if the business plan changes.
How the Rate Is Built
- Index: fixed-rate permanent debt usually prices off the Treasury matching the loan term (5, 7 or 10 years). Floating bridge and some agency ARMs price off 30-day average SOFR.
- Spread: set by leverage, DSCR, loan size, market, asset quality, sponsor strength, term, interest-only and affordability features.
- Rate locks: agency loans can usually be early rate-locked; floating loans usually require an interest-rate cap, which is a real cost when rates are volatile.
Lower leverage tends to buy a tighter spread. Moving from 75% to 65% LTV can improve pricing, and full-term interest-only or a smaller loan can widen it. Ask to see pricing at more than one leverage point.
Fannie Mae DUS vs. Freddie Mac Optigo
Both lend on stabilized 5+ unit property through approved lenders, and both publish their own credit standards. In practice, the better execution depends on the deal and their current priorities:
- Fannie Mae DUS lenders share risk with Fannie and can often be flexible on structure and larger or more specialized assets.
- Freddie Mac Optigo is often competitive on floating-rate structures and through its Small Balance Loan program for smaller buildings.
- Mission business: both often price workforce and affordable housing, and green improvements, more aggressively.
Pricing between the two shifts over the year as each agency works toward its volume caps and mission goals. Quote both before you choose.
Prepayment: Price the Exit Before You Lock
- Yield maintenance: you compensate the lender for lost interest relative to Treasuries. It's expensive when rates fall and cheaper when rates rise. Common on agency fixed-rate loans.
- Defeasance: you replace the collateral with a portfolio of Treasuries rather than paying off. Typical for CMBS, with legal and consultant costs on top.
- Step-down: a declining percentage (for example 5-4-3-2-1). It's predictable and common with banks, some agency small-balance programs, and bridge loans.
- Open periods: most loans open in the last few months of term.
If there's a real chance you'll sell or refinance early, a step-down structure or a floating loan with a short lockout may be worth a higher spread. Model the exit cost at a few rate scenarios before you sign.
Related: Multifamily Refinance, Bridge and Agency Loans · Commercial Multifamily Loans Guide
Rates and terms vary by property, market and sponsor and are subject to underwriting and approval.
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