Question on fixed-rate vs. floating rate financing

I received this most recent lender quote:
65% loan-to-cost
5 years to maturity
Floating rate of LIBOR plus spread of 4%
2% LIBOR Floot
So since LIBOR is below 2%, the floor would come into effect, so 2% + 4% = 6% starting rate, until LIBOR goes above 2%, which probably won't be for some time.
I prefer to do fixed rate debt on all of my investments, so I am trying to understand, if I wanted to do an interest rate "swap", how would I price it? Would I find the 5 year swap rate and add the 4% spread to it to determine what my fixed rate would be?
In Buying Property - Asked by Eric G. - Oct 13, 2009
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Answer(s)

Gregory G.
Broker/Agent
San Francisco, CA

Yes, a swap rate is paying a premium on a separate policy to literally fix your variable rate. I did one last year on 2.4 million dollar loan and we were able to get the Buyer a fixed rate of 6.24% at the end of the day.
Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531
(415)225-9894
gregory.garver@gmail.com
http://www.gregorygarver.com

Oct 23, 2009
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