How Does Prepayment Flexibility Work in Fannie Mae's Credit Facility?

How Does Prepayment Flexibility Work in Fannie Mae's Credit Facility?

**Introduction**

Fannie Mae's Credit Facility offers commercial real estate investors an array of benefits, with prepayment flexibility being one of the standout features. Understanding how this flexibility works can help investors manage their debt more effectively and optimize their financial strategies. Here’s a brief overview of the key elements of prepayment flexibility in Fannie Mae’s Credit Facility.

**1. Partial Prepayment**

**Flexible Debt Management:**
   - The Credit Facility allows for partial prepayment of the debt, enabling borrowers to pay off specific portions of their loan rather than the entire amount. This flexibility is crucial for strategic financial management, allowing investors to align debt payments with their financial capacity and business needs.

**2. Declining Prepayment Premiums**

**Structured Prepayment Penalties:**
   - Fannie Mae offers a declining prepayment premium structure, which reduces the penalties for prepayment over time. For example, a 10-year fixed-rate loan might start with a prepayment penalty of 5% in the first year, decreasing each year until it reaches 1%. (https://multifamily.fanniemae.com/financing-options/conventional-products/declining-prepayment-premium)​.

**3. Laddered Maturities**

**Managing Cash Flows:**
   - Borrowers can structure their debt with laddered maturities, aligning the repayment schedules of different loans within their portfolio. This approach helps manage cash flows more efficiently and reduces the refinancing risk by spreading out the loan maturities over time.

**4. Substitution of Collateral**

**Flexibility in Property Sales:**
   - One of the unique features of Fannie Mae’s Credit Facility is the ability to substitute collateral. If a borrower sells a property, they can replace it with another qualifying property without incurring significant prepayment penalties. This feature provides significant flexibility for investors looking to adjust their portfolios without being penalized for early repayment.【https://multifamily.fanniemae.com/financing-options/conventional-products/declining-prepayment-premium】.

**Conclusion**

Fannie Mae’s Credit Facility offers significant prepayment flexibility, providing commercial real estate investors with tools to manage their debt more strategically. From partial prepayments and declining prepayment premiums to laddered maturities and collateral substitution, these features collectively make Fannie Mae’s Credit Facility a highly adaptable financing option. For more details and personalized advice, contact Atlantic Commercial to explore how these features can benefit your investment strategy.

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**About Atlantic Commercial**

Atlantic Commercial provides expert guidance on Fannie Mae’s Credit Facility and other commercial lending options. Contact us today to learn more about how we can help you leverage these features for your real estate investments.