Hello Everyone,
I am curious if anybody has experience in terms of financing properties.
When taking out a loan for RE, is it an industry standard to always try and obtain a LIBOR rate rather than the Prime? In every forum, it seems that all these firms are using LIBOR as their index + a spread.
Can anyone give their input ? Thanks
| +72 | Hiring Analyst/Associate - Advice | 32 | 3h | |
| +44 | Current CRE Phase | 19 | 3d | |
| +40 | Laid Off - Multifamily Acquisitions Help | 9 | 15h | |
| +26 | Best Brokerages in South Florida | 18 | 1d | |
| +26 | Capital Formation | 9 | 4d | |
| +25 | PART 2: Increasing RE Industry's Cash Compensation, Collectively | 1 | 5d | |
| +23 | UK Development | 4 | 1d | |
| How many days a week are you expected to be in the office? | 23 | 1d | ||
| +23 | NYU MSRE Program | 7 | 3d | |
| +21 | Is construction profitable? How do you raise capital? | 4 | 28m |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
This is because typically banks will only offer their lowest possible spread option on LIBOR pricing, because it more aligns with their cost of funds and gives a tiny bit of prepayment protection. Plus libor pricing can be swapped.
Prime can be swapped too, anything can be swapped.
True, but when you factor in liquidity, does it really matter that you can swap anything? LIBOR swap market is the most liquid.
I met with a bridge loan fund that ties their loans to Prime since pricing has got so competitive on the private debt side. Banks typically lend on LIBOR or fixed (CMBS)
Where I worked, we gave revolving lines of credit to clients who were'nt financially savvy. We used prime because it changed less frequently as to avoid confusing the clients who'd think we were ripping them off
Regional banks historically offer construction, bridge and lines tied to Prime. It's been like that for decades. LIBOR is a fairly new phenomenon.
LIBOR is definitely a more standard short-term, private sector credit benchmark. Prime is the rate charged to middle market corporate clients. Libor has more derivative pricing applications than does prime.
Thanks for the input.
So on a line of credit for over 1 million dollars(2 year term), it would be in my best interest to go with LIBOR so rates won't go as high the prime rate ?
We use EURIBOR with a floor of 0%.
Molestiae voluptas voluptatem iure molestiae enim totam sapiente est. Qui qui est sit eos fugit eum. Ut quia vero architecto.
Odio est ipsam atque saepe beatae velit voluptates enim. Dolore voluptate sed assumenda perspiciatis et nobis. Qui sed quae atque quisquam ut autem repellat. Molestiae harum ullam vero ut veniam repudiandae et. Corrupti ad modi porro nemo. Voluptatibus ex aliquid molestias placeat quod quaerat. Error veritatis molestiae et autem occaecati quam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...