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CMBS loans have become an increasingly popular way for commercial real estate developers and investors to get the capital they need to succeed. But what are they, how do they work, and are they right for your project? Here’s everything you need to know about CMBS loans and how to get a quote from us.
A CMBS loan, or commercial mortgage-backed security loan, is a form of financing for a commercial real estate property. It’s also known as a conduit loan, and the lenders that provide these CMBS conduit loans are known as conduit lenders.
What sets CMBS loans apart from traditional commercial mortgage loans is that lenders don’t keep the loans they originate. They’re ultimately sold as CMBS bonds in bundles to investors, a process known as securitization.
While CMBSs may be different from traditional commercial real estate loans, their origination process is relatively similar. This two-step process begins with the issuance of a term sheet to the borrower. This sheet will provide details about the loan amount, loan rate, and other terms. Once the approval process is complete, including appraisals and other due diligence, the loan will be securitized and sold to investors.
As a result, the organization that you interact with to service your loan usually won’t be the same one that originates the loan.
Maturity in lending refers to the date when the last payment of a loan is due, at which point the loan will be considered ‘paid off.’
In a CMBS loan, that final loan payment may not be due to the loan originator, as your loan will have likely been sold on the market as a bond after being bundled with other CMBS loans.
The process for underwriting a CMBS loan can often be a bit more relaxed than in a traditional commercial real estate loan. That’s because CMBS loan underwriting is mainly focused on assets. This makes a borrower’s financial history, including less-than-ideal credit, less of a limiting factor when it comes to getting approval.
Wondering whether a CMBS loan could be useful for your unique project? Commercial mortgage-backed securities can be used for the full range of commercial real estate projects, including:
Have questions about whether your project could qualify for CMBS financing? Contact us today and we’ll be happy to answer all of your questions.
CMBS loans can be issued by a range of CMBS lenders, ranging from big names to lesser known institutions. That said, around 50% of all CMBS loans come from one of the following major players from our CMBS lenders list— not including loan programs from Fannie Mae and Freddie Mac:
At Clopton Capital, our wide range of partners in the world of CMBS lending means that we can access the best possible terms for you based on your needs and financial situation.
CMBS loans feature many of the familiar elements of commercial real estate loans, except for the fact that they are made to be sold to investors through bonds. The way that they’re handled for tax purposes also differs for lenders, but that doesn’t directly affect you as a borrower.
CMBS loans also feature flexible underwriting, favorable terms for borrowers, and the chance to get your project underway even without a stellar financial history.
CMBS rates are constantly changing based on market conditions, but the current trend in the industry means that rates are in a historically great place! For a more detailed estimate of current rates based on the type of loan you’re seeking, use our hotel loan estimate calculator below.
Want to know what your CMBS loan might look like? Use our calculator for a rough estimate, whether you’re looking for a construction loan or more traditional mortgage. Keep in mind that we’ll need to know more details about your specific case in order to provide a more accurate assessment of potential CMBS loan options, but this calculator should provide a great starting point on your journey to getting the commercial real estate funding you need to succeed.
When you enter into a traditional commercial loan, you agree to pay back the original lender at a specified interest rate and period. But in a CMBS loan, your loan is packaged with others like it and bundled into a trust. This trust is known as a real estate mortgage investment conduit (REMIC), and it gets turned into a series of bonds and then sold to real estate investors. This is called securitization.
Once your CMBS is sold, it will likely be managed by a loan servicing company. If any issues pop up over the course of this loan, you’ll interact with that loan servicing company rather than the company that initially lent you the money. While this shouldn’t cause any major issues, it’s important to know up-front so you don’t run into any unexpected confusion later.
We’re tapped into a large network of loan assumption advisors who specialize in CMBS loan assumption. If you want to learn more, contact us in order to find out how you can be put in touch with some of the most trusted CMBS loan assumption advisors in the market.
The loan assumption process requires that both parties are aligned in terms of priorities, preferred terms, and the details of the assumption. One downside of this process is that approval can take time, time which can get in the way of either the buyer’s or the seller’s plans.
CMBS loans aren’t for everyone. They have their downsides, and they may not be effective for your unique situation. But they can also provide a range of high-value benefits that make them attractive for a wide range of commercial real estate investing experts. Here are some of the pros and cons of CMBS loans.
Wondering what kind of loan terms you can expect from Clopton Capital for a CMBS loan?
Like all lending in the commercial arena, it is a CMBS loan requisite to only fund industrial, commercial, hotels, and multifamily – never residential. Then too it has to be a first lien loan, thus canceling out 2nd lien advances from the equation. The interest rate is always fixed (i.e. never variable) and amortized generally over 25 – 30 years. However, the loan terms are ranged between 5 to 10 years, with 15 years considered extraordinarily long. Sometimes an interest-only period of payment is included. Now with amortization and term being unaligned, typically these loans end with a big balloon payment or otherwise need to be refinanced. It is adaptable to most borrower structures including partnerships, trusts, corporations, LLCs, Delaware Corporations, estates, and even foreign nationals. Properties in every USA city, town or country district qualifies for consideration.
Clopton Capital prides itself on its seamless ability to give borrowers on-demand access to the most competitive commercial mortgage lenders handling CMBS transactions in the business – and any other funding option for that matter. We can demonstrate several billion dollars in closed commercial leveraging deals over the last 10 years built purely on trust and close relationships with primary lenders in every state. If anyone can make a CMBS facilitation possible for you, we can. When you connect with us you are sure to enjoy the uninterrupted and focused attention that our open-book communications policy is famous for providing.
To understand more about CMBS loans and the securitization process, or to get a fast quote, contact one of our commercial mortgage lenders by calling 866-647-1650 or using the Contact Us form available from the menu. We’re always happy to work with investors to find the right CMBS loan rates and repayment plans to suit your needs. And with low closing costs attached to a straightforward documentation and underwriting process, your commercial loan experience will be stress free.
Commercial mortgage refinance is a process by which the interest rate on a commercial loan is reduced. Contact Us – 866-647-1650
Banks make money on CMBS loans by selling them in bundles to investors, similar to the way that wholesalers earn money in the retail world.
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