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Commercial Loan Rates Today

Commercial Loan Rates - Lowest to Highest

Rates as of: 11/10/2024
Rate yrs/fixed LTV Am
HUD/FHA 5.39 – 5.74% 35 80 - 85% 35
Small Banks 5.67 – 6.84% 10 70 - 75% 20 - 30
Fannie Mae 5.70 – 6.40% 5 – 30 75 - 80% 30
Large Banks 5.71 – 6.28% 10 70 - 75% 20 - 30
Credit Unions 5.73 – 5.98% 5 – 10 75%
Life Companies 5.80 – 6.30% 5 – 25 65 - 70% 15 - 30
REIT 5.80 – 6.50% 5 – 15 75% 25
Regional Banks 5.98 – 6.35% 3 - 10 75% 25 - 30
Freddie Mac 6.11 – 6.48% 5 - 10 75 - 80% 30
National Bank Capital Divisions 6.14 – 6.28% 5 – 10 65 - 70%
CMBS 6.16 – 6.25% 5 – 10 75% 25 - 30
Community Banks 6.25 – 6.48% 3 – 5 65 - 75% 25
SBA 7A 8.50 - 10.75% 5 – 25 75 - 90% 25
Poor Credit Secondary Market Lenders 8.50 – 10.00% 3 - 5 70 - 75% 30
Crowd Funding 9.00 – 10.50% 5 70 - 80% Int. Only
Private Debt Funds 9.50 – 11.00% 2 - 5 70 - 75% Int. Only
Hard Money 9.99 – 13.00% 1 – 3 70% Int. Only

Commercial Construction Loan Rates as of 11/10/2024

FHA Commercial Construction Loan (Multifamily)

on the 10 year US Treasury Rate. Rate is fixed for the life of the construction loan and also for the full 40 years for the permanent loan.

5.81 – 6.21%
Life Company Commercial Construction Loan

Based on the 30 day SOFR rate.  Rate changes monthly

7.00 – 7.35%
National Bank Commercial Construction Loan

Based on the 30 day SOFR rate. Rate changes monthly

7.74 - 8.00%
Regional Bank Commercial Construction Loan

Based on the 30 day SOFR rate.  Rate changes monthly

8.09 – 8.50%
Community Bank Commercial Construction Loan

Based on Prime Rate.Rate changes has prime rate changes

8.50 – 9.00%
Private Debt Fund Construction Loan
9.50 – 10.50%
Hard Money Commercial Construction Loan
9.99 – 13.00%

Commercial Loan Rate Outlook Report

 

 

November 5, 2024

Are Mortgage Rates Going to Come Down in 2024 and 2025

Are mortgage rates going to come down soon? Fannie Mae is projecting long term mortgages to average 6.6% for the remainder of 2024 and to only decline to 5.9% in 2025.  The Mortgage Bankers Association is projecting 6.2% by year end 2024, and 5.9% by year end 2025. The National Association of Realtors predicts mortgage rates will end 2024 at 6.01% and decline further in 2025 to 5.8%. And Realtor.com predicts mortgage rates to end 2024 at 6.2%.

As you can see, the research these experts have done forecasts there will only be a slight decrease in rates through 2025.  So, if you are hoping to get rates back to the low 4 percent range or even the low 5 percent range by the close of 2025, it doesn’t look likely. Feel free to call us as we shop our platform of over 50 funds to find the lowest rate for you. 

What Affects Long Term Mortgage Rates  

I have been a commercial mortgage banker since  1997.  I know that long term mortgage rates follow the 10-year treasury yield.  How do I know this?  Because I look at the 10-year yield daily to know if our rates are going up or down.   So, what affects the 10-year treasury yield?  Both Bank Rate, and Investopedia agree that when the economy performs well and there is confidence that it will remain that way for a while, more investors move away from the safety of treasury bonds to invest in riskier investments like the stock market. This creates lower demand for 10-year treasury bonds and the Feds raise the yield on them to attract more investors. Thus, long term mortgage rates for both residential and commercial loans go up.

So, what happens when the opposite occurs when the economy tanks? When the jobs report, unemployment, inflation and GDP perform poorly the stock market usually declines and more investors flee back to the safety of treasury bonds.  Now there is high demand for these bonds and the Feds lower the yield to make them more attractive; the effect of which is to lower long term mortgage rates.  So, keep an eye on how the economy is doing along with the stock market to project the direction of long-term mortgage rates. 

 

Why Longe Term Commercial Mortgage Rates went Up after the Fed’s Lowered Rates.

On September 18, 2024, the Federal Reserve Board had their highly anticipated meeting. With inflation down to 2.2%, everyone expected them to lower interest rates for the first time in over two years, which they did by a whooping half point.  Most people expected long-term mortgage rates to go down after Fed Chairman Jerome Powell’s announcement. But the opposite happened.  They went up.

 

Do long term mortgage rates mirror the increase or decrease made to rates by the Reserve?  Most people think this.  But this is a misunderstanding.  Federal Rates that do change very quickly are the Federal Funds Rate (the interest rate for banks that borrower from the Federal Reserve Bank or other banks), Prime Rate and other short-term rates like the SOFR rate are also affected.  Keep in mind though, there is not a mandate by the Federal Reserve Bank, that these rates go up or down when they change the Federal Funds Rate.  These short-term rates affect credit cards, business loans, home equity lines of credit and all short-term loans.

 

According to the Federal Reserve Bank of St Louis, there is no direct correlation between the Fed’s changing short-term rates and long-term mortgage rates.  https://www.stlouisfed.org/on-the-economy/2017/october/increases-fed-fun... Long term mortgage rates follow almost exactly the 10-year treasury yield.  However, there does seem to be a slight trickle up effect from short-term rates to long-term rates after a few weeks. 

 

What Commercial Loan Programs will have The Best Rates

According to Freddie Mac, on September 19, 2024, the day after the Fed’s lowered rates,  the average rate on a Freddie Mac 30-year fixed home loan was at 6.09 as the 10-year treasury was just about at its lowest in over a year. By October 3, this rose to only 6.12%, and by October 7, 6.22%, as the 10-year treasury hit 4.00%, the highest in 2 months.  Rates should have been a lot higher, but in my opinion, Freddie kept these rates artificially low to meet consumer expectations and stimulate the economy.  From September 16, to October 7, our securitized commercial mortgage rates from Fannie Mae, Freddie Mac, FHA, Life Companies and CMBS increased by an average of 26 - 35 bps which correlates with the increase in the 10-year treasury yield during this period.  So, these commercial loan programs must await the lowering of treasury yields for their rates to come down.

 

To compound this rate increase, Freddie Mac Multifamily raised interest rates 20 bps on October 7th which makes their loans un-competitive.  Their purpose was to slow down demand as they are running out of their allotment of funds for 2024 which makes this one of the worst places to get a multifamily loan.  Fannie Mae, Commercial Mortgage Backed Security (CMBS) loans, REITs and Life Companies raised their rates an average of .32 bps from September 19 through October 7th but will lower their rates when the 10 year treasury yield comes down.

 

 One unexpected silver lining is that most community banks and credit unions did lower their rates on commercial loans by .25% for stronger customers right after the Fed’s lowered short-term rates.  What they actually did, was use the Feds lowering of short term rates as a reason to stimulate more loan production.  Keep in mind that large national banks and credit unions have a surplus of their own money to lend and can essentially lend at whatever rate they want as they rarely have to borrow funds.  But they are run by smart executives who are going to sell their money at what they feel the market will bear.  So, don’t expect a large giveaway here.   

 

Will Long Term Mortgage Rates Come Down After The Feds Meet Again in 2024?

It is expected that the Fed’s will lower rates again during their November 6,7 and December 17,18 meetings by at least a quarter point. But do not expect this to affect long-term mortgage rates.  If it does, it is likely a consequence, which does happen now and then.   But as mentioned,  the condition of the economy, which affects the stock market, which affects treasury bond yields will have the most influence on long term mortgage rates. Stay tuned. 

Commercial Loan Rates & Guidelines for 15 Top Loan Programs

Commercial Mortgage-Backed Security (CMBS) Loans

Get a low 10-year fixed at a lower rate than what most banks have for their five-year fixed loan programs

These non-recourse loans have competitive 5- and 10-year fixed rates and can do

a blanket loan to include multiple properties. Lenders close with their own funds and

then sell the loans in securitized pools as mortgage-backed security bonds.

 

Acceptable Property Types: Multifamily, mixed use, senior housing, student housing, mobile home parks, self-storage, industrial, hotels, office, and retail.

Types of Loans: Permanent loans only

 

Program Guidelines and Requirements

▪ Loan size: $2,000,000–50,000,000

▪ LTV: 75% with cash out

For More on CMBS Loans go here

Community Banks

If you don’t have a high net worth or experience but have solid income, this is where you will qualify.

 

These are small banks that make loans in their own backyard. They have low requirements for net worth and liquidity, but require good income and credit. Most are not fond of cash-out refinancing.

 

Acceptable Property Types: Multifamily, mixed use, senior housing, student housing, mobile home parks, self-storage, industrial, hotels, office, retail, business owner-occupied, and land

Types of Loans: Permanent, construction, rehabilitation, mini-perm, and credit lines.

 

Program Guidelines and Requirements

▪ Loan size: $150,000––$6,000,000

▪ LTV: 75%; 65% with cash out

Credit Unions

If you have strong personal income and don’t want a prepayment penalty, this is the place to shop 

 

Credit unions make loans to members who live nearby. They are nonprofit and can be very competitive on rates and loan fees. They are known for not having prepayment penalties.

 

Acceptable Property Types: Multifamily, mixed use, senior housing, student housing, mobile home parks, self-storage, industrial, hotels, office, retail, business owner-occupied, and land

Types of Loans: Permanent, rehabilitation, construction, and credit lines

 

Program Guidelines and Requirements

▪ Loan size: $75,000–15,000,000

▪ LTV: 75%; 65% with cash out

Crowdfunding Loans

If you only have 15%  to put down, this can work here. But be careful. These lenders will want a preferred return and most of the ownership.

 

These loans can fund quickly in three or four weeks and are easier to qualify for than bank loans. Crowdfunding platforms are lenders that allow investors to invest in larger properties by pooling their money with other investors. Investors choose the properties they want to invest in, so be wary; sometimes they change their mind prior to closing and the crowdfunder has to find a replacement.

 

Acceptable Property Types: Multifamily, mixed use, senior housing, student housing, self-storage, and industrial

Types of Loans: Short-term, bridge/rehabilitation, and construction

 

Program Guidelines and Requirements

▪ Loan size: $250,000–12,000,000

▪ LTV: 75–80%

Fannie Mae Multifamily Loans

These low-rate nonrecourse loans can be fixed for up to 30 years

 

Fannie Mae, short for Federal National Mortgage Association, is a government-sponsored enterprise (GSE) and has some of the lowest rates and best terms around for apartment properties of five units or more. Rates can be fixed from 5 to 30 years. Fannie Mae does not actually originate loans, but is a publicly-traded corporation that guarantees and securitizes them to be sold as mortgage-backed security bonds. Authorized lenders close with their own funds and then sell the loans to Fannie Mae.

 

Acceptable Property Types: Multifamily, senior housing, student housing, and mobile home parks

Types of Loans: Permanent loans only

 

Program Guidelines and Requirements

▪ Loan size: $1,000,000—unlimited

▪ LTV: 80%, 75% with cash out

For more on Fannie Mae Loans go here

 

Freddie Mac Multifamily Loans

5 – 10 Year Non-recourse, low rates, and full-term interest only

 

Freddie Mac is a GSE that securitizes loans from their approved lenders. These are put into mortgage pools and sold to investors as mortgage-backed security bonds on Wall Street.

 

Acceptable Property Types: Multifamily, senior housing, and student housing

Types of Loans: Permanent loans only

 

Program Guidelines and Requirements

▪ Loan size: $1,000,000–50,000,000

▪ LTV: 75% with cash out

For more on Freddie Mac Loans go here

Hard Money Bridge and Construction Loans

These are expensive temporary loans, but do not require great credit and net worth; they are fast and for many projects they pencil.

 

Poor credit and low net worth are usually acceptable. These lenders can close very quickly. It’s much better to use a hard money lender that gets their funding from a warehouse line of credit than from small private investors who can change their minds prior to closing.

 

Acceptable Property Types: Multifamily, mixed-use, senior housing, student housing, mobile home parks, self-storage, industrial, hotels, office, retail, business owner-occupied, and land

Types of Loans: Construction, rehabilitation/bridge

 

Program Guidelines and Requirements

▪ Loan size: $750,000–25,000,000

▪ LTV: 65–75%

 

HUD/FHA Multifamily and Healthcare

Being able to fix a low rate for 35 years makes this government loan program very attractive

 

The US Department of Housing and Urban Development (HUD) guarantees loans made from its approved lenders that are sold as the highest-rated mortgage-backed security bonds on Wall Street.

 

Acceptable Property Types: Multifamily, mixed use, senior housing, senior healthcare, and hospitals

Types of Loans: Permanent loans for refinance, acquisition, and rehabilitation; also construction rollover to permanent loans.

 

Permanent Loan Guidelines and Requirements

▪ Loan size: $2,000,000–100,000,000 plus

▪ LTV: 85%; 80% with cash out

For more on HUD/FHA Financing go here

 

Large Commercial Banks

If you are a high-net-worth experienced borrower, have large deposits with the bank, and are competing, they will break the bank to give you the lowest rate

 

These are banks such as Chase, Bank of America, Bank of the Ozarks, and Wells Fargo. They can lend very large amounts in larger cities nationally. They have higher net worth, liquidity, and experience requirements than regional banks. Because they have so much of their own money to lend they can be very competitive on rates and fees.

 

Acceptable Property Types: Multifamily, mixed use, senior housing, student housing, mobile home parks, self-storage, industrial, hotels, office, retail, business owner-occupied, and land

Types of Loans: Permanent, construction, rehabilitation, mini-perm, and credit lines

 

Program Guidelines and Requirements

▪ Loan size: $250,000–75,000,000

▪ LTV: 75%; 70% with cash out

 

Life Companies

 

They prefer low LTVs, strong borrowers, and large cities. But have the very lowest long-term fixed rates.

 

These large insurance companies have capital divisions that lend on commercial real estate. They prefer lending at 65% LTV or less, and have very low rates that can be locked for up to 25 years. They prefer large cities and financially strong experienced borrowers. Life companies lend their own money, with many doing CMBS executions.

 

Acceptable Property Types: Multifamily, senior housing, student housing, mixed-use, office, retail, industrial, and hotel

Types of Loans: Permanent, bridge, and construction loans

 

Program Guidelines and Requirements

▪ Loan size: $10,000,000–150,000,000 plus

▪ LTV: 70%

 

National Bank Capital Divisions

Loan size is not a problem here—and they have the lowest construction loan rates for strong experienced developers.

 

These subsidiaries of large banks such as JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup have the best loan programs for stronger, experienced borrowers. Along with lending their own money, many can do Fannie Mae, HUD, and CMBS lending.

 

Acceptable Property Types: Multifamily, mixed-use, senior housing, student housing, mobile home parks, self-storage, industrial, office, and retail

Types of Loans: Permanent, construction, and rehabilitation

 

Program Guidelines and Requirements

▪ Loan size: $10,000,000–250,000,000

▪ LTV: 70%

 

 Bad Credit Secondary Market Commercial Lenders

 

Yes, rates are high, but if you have bad credit you can get the project funded here and work on building a higher credit score.

 

If your credit is less than perfect, these loan programs have much better rates and terms than hard money lenders. Commercial mortgage brokers specialize in these loans.

 

Acceptable Property Types: Multifamily, mixed use, senior housing, student housing, self-storage, and industrial, hotels, office, and retail

Types of Loans: Permanent and bridge loans

 

Program Guidelines and Requirements

▪ Loan size: $500,000–6,000,000

▪ LTV: 70% with cash out

For more on Bad/Poor Credit Multifamily Loans go here

 

Private Debt Funds

 

If you are getting turned down at banks and have a strong deal, this is the place to get your loan. They have simple make-sense underwriting.

 

These are private lenders that are regulated by the SEC. They pool money from investors and lend it at moderate to moderately high rates on commercial real estate. Loans are made more on the strength of the property than on the borrower. Commercial mortgage brokers specialize in these loans.

 

Acceptable Property Types: Multifamily, mixed-use, senior housing, student housing, self-storage, industrial, hotels, office, and retail

Types of Loans: Construction, bridge/rehabilitation

 

Program Guidelines and Requirements

▪ Loan size: $3,000,000–75,000,000

▪ LTV: 75% with cash out

For more on private debt fund bridge loans go here

 

Regional Bank Income Property Divisions

You can get a low 3–10-year fixed-rate and lock the rate immediately at application.

 

These lenders are capital divisions of banks and lend in the larger cities in the states they are located in; some lend in neighboring states as well. They generally have lower rates than community banks, can fix a rate for up to 10 years, and can lend larger amounts. Many sell their loans on the secondary market. They have higher net worth and cash requirements than community banks, but some of the lowest rates.

 

Acceptable Property Types: Multifamily, mixed-use, industrial, office, hospitality, and retail

Types of Loans: Permanent loans only

 

Program Guidelines and Requirements

▪ Loan size: $1,000,000–15,000,000

▪ LTV: 75% with cash out

 

SBA for Hospitality, Self-Storage, and Owner-User

Borrow up to 85% for self-storage and hotels.

 

Although the SBA (Small Business Administration) will go up to 90%, plan on 85% unless you can get a seller-carry second mortgage. These loans are easier to qualify for than most commercial loans.

 

Acceptable Property Types: Self-storage, hotels, and owner-occupied business properties

Types of Loans: Permanent and construction loans

 

Program Guidelines and Requirements

▪ Loan size: $125,000–12,000,000

▪ LTV: 85–90%

 

 

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By Terry Painter/Mortgage Banker, Author of “The Encyclopedia of Commercial Real Estate Advice” Publisher-Wiley, Member of The Forbes Real Estate Council

 

Most Commercial Loan Rates are tied to an index like treasury yields or prime rate plus a margin. Rates vary (rate chart below) based on Lender Type and these 5 factors: Property Type, Property Location, Loan Size, Borrower Financial Strength and Credit.

The Truth About How Commercial Lenders Set Rates

In my book, “The Encyclopedia of Commercial Real Estate Advice”, I go over in detail insider tips on how commercial lenders set their interest rates, and fees and how to get them to compete so you get the best rate. Lenders are not going to like that I have disclosed their secrets.  Commercial lenders sell money in the same way auto dealers sell cars.  Both have a cost of goods, and both can really lower the price closer to their cost if they have a lot of inventory and are forced to compete. Car dealers will tell you as you are walking away from a vehicle with a high sticker price,  “This is our best price.  We are only earning $500 above invoice”.  Banks will tell you, when you ask them for a better rate: “this is our best rate based on our cost of funds”. Both make it sound like it is locked in STONE.  But always know -  IT’S NOT!

Large Banks, like Chase, Bank of America, Wells Fargo, and US Bank along with most credit unions have much more inventory than demand and if you can qualify they have the most room to discount rates the most.  Small community banks are in great condition today and also have plenty of funds to lend. Along with large banks, they have a major problem - more money to lend than qualified borrowers.  When a commercial borrower does qualify, and if there is competition, they can skinny down the rate and let’s not forget the loan fee too.  Just like a car dealer, banks don’t earn anything just letting their inventory sit there.

For commercial banks, their cost of goods starts with the cost of funds which is the interest they pay on deposits plus what it costs them to borrower money from the Feds, or other banks.  They then add on to this their overhead expenses like rent, utilities, advertising and taxes. Then on top of that they add on what it costs to put a loan on the books.  From this they determine their breakeven cost.  Now they add to this the minimum profit they need to earn to come up with their floor rate – the lowest rate they can charge.  This rate only goes to their best customers that retain large deposits with the bank.  They are almost never going to offer anyone a rate lower than their floor rate.  But most customers are going to be offered a much higher rate than the floor rate. This is why if you just show the lender a competing offer, the rate will almost always come down.  So when the lender tells you their rate is tied to an index plus a margin, does this mean they cannot lower the rate?  Please check out our video and read on. 

Are Commercial Rates Really Tied to an Index plus a Margin?

All lenders will tell you that their rates are tied to an index plus a margin. The most popular indexes are treasury yields, the federal home loan rate, prime rate, and LIBOR rate.  An example of how a rate is determined this way is the 10 year treasury rate index being at 2.25%.  If the lender adds a margin to this of 2.50%, the all in rate that you are quoted is 4.75%. Lenders love this system as it infers that the rates are set to some government regulated system that is out of their control. This is their gimmick to convince you that the rates they offer you are set in stone and cannot be lowered.  But here’s the truth.  Sure the Indexes are out of the lenders control.  They are set throughout the day by supply and demand in the marketplace and truly do represent market rates.  But this system is misleading because the lender can add to the margin whatever they want to earn based on what they think is the most the market can afford.   Therefore, they can usually earn a little less to keep their money earning money. 

The rate chart below shows a range of rates for the 15 top commercial loan programs that we represent in the US listed in alphabetical order. A range of rates are shown because most commercial loan rates are based on a many factors including: LTV, property quality and borrower credit.   This is followed by guidelines and terms for each program along with the commercial property types they lend on.  This will assist you in determining if it’s the right loan program for you.  Take your time and go through the programs you are interested in carefully to see if they meet your expectations for not only rate, but down payment, loan term, amortization, and prepayment penalty.  And equally important - check and see if you qualify for the loan. If the program does not require tax returns then your personal income is not taken into consideration for qualifying. Listed for each loan program is around 20 guidelines and qualifications. Feel free to call us to get prequalified for any loan programs you like.  Go here to check todays apartment/multifamily loan rates.

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HUD Loans are one of the best options with the current level of interest rates. For a complete guide to HUD Multifamily Loans please go here:

HUD Multifamily Loans - The Complete Guide