Case Study—Artist Refinances Commercial Loan into Residential Loan on Live-Work Studio
A prominent artist with a career of 40+ years came to us for help with an existing commercial, variable interest rate loan on his live-work studio.
The interest rate on this loan, already higher than a regular mortgage rate to begin with, was inching up due to the variable interest rate, which was increasing. The situation threatened to disrupt his operation, and he wanted to refinance into a more favorable loan.
The nature of the property was complicated, as it was commercially zoned but had a special overlay as an artist live-work space, which was only applicable when the occupant had a special permit as an artist from the local city. Several lenders rejected the loan due to the unusual nature of the property.
A mainstream lender known for excellent residential rates initially accepted the loan but then rejected it when it was reviewed by the senior underwriter, on the grounds that the loan would not qualify for a repurchase by Freddie Mac. After reviewing the 1200-page Freddie Mac guidelines for mortgages conforming to purchase requirements on the secondary market, we were able to convince the underwriting team that the loan qualified, and they approved it.
The loan was refinanced into a regular, fixed mortgage with a residential rate, cutting the borrower’s interest rate and monthly payment in half. Additionally, the door was opened for other artist tenants in the building to do the same.
