CMBS Loans: Commercial Mortgage-Backed Securities (U.S.)

CMBS loans—also known as conduit loans—are a popular way to finance commercial real estate in the United States. These loans are structured, securitized, and sold to investors, offering unique benefits and considerations for property owners and investors.

Why Choose a CMBS Loan?

• Competitive Rates: Often lower than traditional bank loans, with fixed or floating options.
• High Leverage: LTVs up to 75–80% for most property types.
• Non-Recourse: Your personal assets are protected in case of default (with standard carve-outs).
• Assumable: Loans can be transferred to a new owner for a fee, making property sales easier.
• Interest-Only Options: Maximize cash flow with full or partial interest-only periods.

Loan Highlights

• Eligible Properties: Office, retail, industrial, multifamily, hotel, self-storage, mixed-use, and more
• Loan Amount Range: $2 million and up (some lenders as low as $1 million)
• Interest Rate: Fixed or floating, often starting at 200 bps above Treasury
• Loan Term: 5, 7, or 10 years (sometimes up to 15)
• Amortization: 25–30 years
• Maximum LTV: 75–80%
• Minimum DSCR: 1.25x
• Minimum Debt Yield: 7%+
• Recourse: Non-recourse (with carve-outs)
• Prepayment: Yield maintenance or defeasance (prepayment can be costly)

Advantages

• Easier Qualification: Asset-focused underwriting, less emphasis on borrower credit or experience
• High Leverage: Up to 80% LTV in some cases
• Low Rates: Often more competitive than bank loans
• Non-Recourse: Protects your personal assets
• Assumable: Can transfer the loan to a new buyer
• Cash-Out Refinance: Extract equity for renovations or business growth

Disadvantages

• Prepayment Penalties: Yield maintenance or defeasance can be expensive
• Less Flexibility: Standardized terms, less room for negotiation
• Servicing: You’ll work with a loan servicer, not the original lender
• Supplemental Financing: Usually not allowed
• Reserves Required: For taxes, insurance, and replacements
• Higher Closing Costs: Legal and rating agency fees can be significant

Eligibility & Property Types

CMBS loans are available for a wide range of income-producing properties:

• Office buildings (Class A & B)
• Retail centers and shopping malls
• Industrial and warehouse facilities
• Hotels and hospitality
• Multifamily and apartment complexes
• Mixed-use developments
• Self-storage

Borrower requirements:

• Net worth: At least 25% of the loan amount
• Liquidity: At least 5% of the loan amount
• DSCR: 1.25x or higher
• Debt yield: 7% or higher

Frequently Asked Questions

What is a CMBS loan?

A CMBS (Commercial Mortgage-Backed Securities) loan is a type of real estate loan secured by a first-position mortgage on a commercial property. The loan is pooled with others, securitized, and sold to investors as bonds.

How do CMBS loans differ from bank loans?

CMBS loans are asset-focused, non-recourse, and often offer higher leverage and lower rates. However, they have stricter terms, less flexibility, and are serviced by third parties rather than the original lender.

What are the main benefits of CMBS loans?

Competitive rates, high leverage, non-recourse structure, and the ability to assume or transfer the loan.

What are the risks or downsides?

Difficult and expensive prepayment, less flexibility, and the need to work with a loan servicer instead of a relationship lender.

What types of properties are eligible?

Office, retail, industrial, hotel, multifamily, self-storage, and mixed-use properties.

What are the typical terms?

Loan amounts from $2M+, 5–10 year terms, 25–30 year amortization, up to 80% LTV, and non-recourse.

Can I prepay a CMBS loan?

Prepayment is possible but usually expensive, requiring yield maintenance or defeasance.

Real Stories

“CMBS financing allowed us to acquire a large retail center with minimal equity and a competitive rate. The process was structured, but the non-recourse feature gave us peace of mind.”
— Commercial Real Estate Investor, New York

Ready to Take the Next Step?

Glossary

• Non-Recourse: The lender cannot pursue your personal assets in case of default (except for carve-outs). Learn more
• Defeasance: A prepayment method that replaces the loan collateral with government securities. Learn more
• Yield Maintenance: A prepayment penalty designed to make the lender whole. Learn more
• Assumable Loan: A loan that can be transferred to a new owner. Learn more