CMBS loans, also known as conduit loans, have emerged as one of the most popular forms of commercial real estate financing in recent years. CMBS stands for commercial mortgage based security, as these loans are later pooled with similar loans, and packaged into bonds that can be sold to investors on the secondary market. CMBS loans are known for their lenient credit requirements, and typically have fixed-rate terms of 5, 7, or 10 years. Commercial Mortgage Backed Securities (CMBS) loans are underwritten and funded by a qualified conduit lender, then sold to a trust. Those trusts pool many single loans of varying size, property type, and location, then issues bonds that vary in yield, duration, and payment priority. CMBS loans offer borrowers the opportunity to lock in rates comparable to those offered by life companies for a relatively extended period of time (most common is 10 years). CMBS lenders are usually willing to do very high-dollar deals, and do commercial loans in tertiary markets, whereas other lenders prefer to be in or near major markets.
What are the Common Features of CMBS Loans?
In addition to generally having fixed-interest rates, CMBS loans typically have terms of 5-10 years, with amortizations of between 25 and 30 years. Plus, CMBS loans are usually non-recourse and fully assumable. This means that, in most cases, a lender cannot go after a borrower’s personal property in the case of a loan default, and, that the borrower can pass on the CMBS loan to a new borrower should they want to sell their property.
To learn more, Contact us
