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
Report Abuse
Answer this Question


Gregory G.
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

Oct 23, 2009
Report Abuse

Welcome to Answers

LoopNet Answers is where the commercial real estate community shares what they know to help each other out. And it's all for free.

Ask a question to get advice from brokers, investors, professionals and local experts.

Answer questions to raise your visibility as a trusted advisor and build new relationships.

Ask a Question

Post Question