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 non-recourse 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%
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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