Key takeaways
- Fixed for long-term hold.
- ARM acceptable with exit < initial fixed period.
- Floating for short-term value-add.
- Hedge with rate caps.
- Stress test every loan.
Core concepts
Fixed
Predictable for buy-and-hold.
ARM
Lower initial; risk after fixed period.
Floating
SOFR + spread; for bridge.
Step-by-step framework
- 1Match rate type to hold.
- 2Stress test +200 bps.
- 3Cap floating where possible.
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Common mistakes to avoid
- ARM without exit.
- Floating without cap.
Frequently asked questions
Fixed default?
Yes for long-hold.
ARM acceptable?
If exit certain.
Floating + cap?
Standard for bridge.
Stress test?
Always.
Action checklist
- ☐Rate type matched.
- ☐Stress tested.
- ☐Cap if floating.
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