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Details about the 25-Year Fixed-Rate Option for 504 Loans
As we recently announced, the SBA has added the option of a highly desirable 25-year fixed rate term for 504 loans approved on or after April 2, 2018. This addition will offer a great complement to the 10 and 20 year terms which have been in place over the program’s 32-year history. The SBA and SBA’s Fiscal Agent for the 504 program has provided the following details:
- Loans approved for the 25-year term are to be approved on or after April 2, 2018.
- The third-party lender accompanying a 25-year 504 loan has to issue a minimum 10-year term, the same requirement currently in place on a 20-year 504 loan.
- The voluntary prepayment schedule will stay at 10-years for the 25-year loans, the same as for 20-year loans.
- The first funding for the 25-year loans will occur in July 2018 and monthly thereafter, provided there are approved 25-year loans each month.
- While a track record of 25-year debenture sales will be needed to provide a predictable pricing model, for the first three sales, the Underwriters, Bank of America Merrill Lynch and Credit Suisse have committed to pricing a specified amount of these debentures no wider than +35bps to the 20-year debenture rate. As an example, a theoretical 25-year debenture priced in March would have provided an Effective Rate maximum of 5.19% versus the 4.92% 20-year rate.
We’re excited for this new 25-year option and have added the new feature to our Loan Calculator page on our website. See what a difference a 25-year term will make on your next project! |
