The Real Estate Capital Institute®

Long Story Short -- Ten Reasons for Locking into Long-Term Realty Financing

Despite Market Turmoil, Long-Term Permanent Loans Find Best Mortgage Pricing


Chicago, IL -- (ReleaseWire) -- 09/19/2007 -- Since December, the yield curve remains inverted, suggesting the looming threat of a recession and credit market turmoil. However, the previous time the yield curve inverted within the past decade, a recession did not occur. This phenomenon has proven to be a result of domestic and international investors flocking to longer-term, US debt instruments. The winners, of course, are long-term borrowers. Here's why:

1). Abundant supply funds and lenders (although pricing is readjusted to closer reflect risks in subprime debt)
2). Amortization schedules flexible, including interest-only
3). Best spreads and lowest rates as compared with other shorter terms
4). Ideal for fixed-income, cash flow (e.g., single tenant, credit lease)
5). Nearly all types of income-properties with provable cash flow are suitable
6). Long-term protection against inflation and rate increases, as rates are locked
7). Property will be worth more with below-market debt, should interest rates increase
8). Closing costs and bundled third-party fees are competitively priced and spread out over a longer term
9). Flexible loan payoff provisions are negotiable at an additional charge
10). Various leverage levels provide additional discounts and pricing options

The main risks of locking into long-term debt include: short-term hold/sell strategy, interest rate declines create lower asset values, limited flexibility for additional loan proceeds and restrictive prepayment provisions.

The Real Estate Capital Institute's research director, Nat Zvislo, says "Real estate capital markets have changed substantially since this July. However, long-term financing still remains a bargain. Adding, "Ten-year-term loans are often priced 15 to 20 basis points lower than shorter-term debt of five to seven years as mortgage buyers prefer longer-term notes."

The Real Estate Capital Institute ( is an independent research organization exclusively dedicated to studying domestic debt and equity capital markets for commercial and other income properties. Mortgage data for long-term debt covering different property types is also available. On a daily basis, the Institute reports hourly interest-rate updates through the Real Estate Capital Rateline at 7RE-CAPITAL (773-227-4825).