What Is The Current Commercial Mortgage Rate | Riverdale Funding

What Is The Current Commercial Mortgage Rate

Nov 08, 2017

 

Riverdale Funding - Hard Money Commercial Loans

Fixed Rate   Riverdale Funding  
Term   Loan-to-Value (LTV) Interest Rates Loan Program Features
1-3 Year Terms   Max 65%  8-12%*
  • All Credit History Accepted
  • No Financials Required
  • No Income Verification
  • Express Loan Process & Fast Closing
  • No Pre-Pay

* Rate and Terms are subject to change without notice, dependent upon property location, property condition, and subject to underwriter review.

CONVENTIONAL LENDER - DEBT MARKET RATES AND TERMS


 

Why are Private/Hard Money Interest Rates Higher than Conventional Rates?

 

Interest rates for commercial private money loans are typically higher than those of conventional lenders because the loans they issue are riskier than conventional lenders (i.e. banks, agencies, insurance companies, and credit unions) are willing to accept. 

 

Examples of higher risk loan scenarios that commercial private money lend on include:  

  • Lending to a borrower with credit issues or financial shortcomings
  • Lending on a commercial property that is specialized, has financial deficiencies, needs maintenance and capital improvements, or falls outside of the Class A / Class B rating conventional lenders seek.
  • Quickly funding a commercial loan without gathering an extensive loan package

 

Riverdale Funding is a true asset-based lender. We accept all credit history, we do not require property or personal financials, and we can close our loans quickly.

 


 

Current Commercial Mortgage & Loan Rate for November 2017

Conventional Lender - Debt Market Rates and Terms

 

View today's current commercial loan interest rates.  The following data represents interest rate ranges for commercial & multi-family loans from Agencies (Fannie Mae and Freddie Mac), Commercial Mortgage-Backed Securites (CMBS),  Life Insurance companies, and Conventional bank lenders for commercial loans that conform to their credit standards and underwriting guidelines.  

Generally, conventional commercial lenders offer these rates to borrowers who possess great credit, have a high net-worth with substantial liquidity, and who offer stabilized Class A or Class B properties as their loan collateral. 

Note: The rates shown below are not representative of the less-restrictive private money commercial loan program offerings made by Riverdale Funding.

 

CMBS / Agency & Portfolio Lender - Commercial Loan Programs**

Fixed Rate   CMBS / Agency Lenders   Portfolio Lenders*
Term   LTV Interest Rates   LTV Interest Rates
5 Year   55% to 75%  3.90% to 4.75%   55% to 75% 3.80% to 4.68%
7 Year   55% to 75% 3.99% to 4.85%   55% to 75% 3.98% to 4.85%
10 Year   55% to 75% 4.12% to 4.96%   55% to 75% 4.12% to 4.96%

Rates shown above are as of November 2017

 

CMBS / Agency & Portfolio Lender - Multifamily Loan Programs**  |  OVER $3 Million

Fixed Rate   CMBS / Agency Lenders   Portfolio Lenders*
Term   LTV Interest Rates   LTV Interest Rates
5 Year   55% to 75%  3.68% to 4.30%   55% to 75% 3.60% to 4.25%
7 Year   55% to 75% 3.88% to 4.50%   55% to 75% 3.78% to 4.45%
10 Year   55% to 75% 4.05% to 4.67%   55% to 75% 3.90% to 4.58%

Rates shown above are as of November 2017

 

CMBS Agency & Portfolio Lender - Multifamily Loan Programs**  |  UNDER $3 Million

Fixed Rate   CMBS / Agency Lenders   Portfolio Lenders*
Term   LTV Interest Rates   LTV Interest Rates
5 Year   55% to 75%  3.69% to 4.39%   55% to 75% 3.60% to 4.34%
7 Year   55% to 75% 3.88% to 4.55%   55% to 75% 3.78% to 4.50%
10 Year   55% to 75% 4.03% to 4.72%   55% to 75% 3.93% to 4.66%

Rates shown above are as of November 2017

 

* Portfolio lenders include: Conventional Lenders, Credit Unions, and Life Insurance Company lenders

** Interest Rates Disclaimer:  All rates, terms, and conditions mentioned above are strictly sample interest rate ranges and are subject to change without notice.  These rates are not representative of the commercial loan offerings made by Riverdale Funding.  Furthermore, this information is strictly for informational purposes only and should not be considered / construed as an offer to lend or relied upon to make financial or investment decisions. 

 



Short-Term Commercial Loan Alternatives

Commercial bridge loans are an alternative type of commercial financing, which is typically offered in terms of one to three years.  A commercial hard money loan is a useful option for a borrower who may not currently qualify for a conventional commercial mortgage or may have a time-sensitive project that requires a quick loan closing. 

Hard money commercial real estate loans are secured by the property being offered as collateral. It would be good to note that bridge loans do generally have a higher cost of money than conventional commercial loans due to the associated "risk" a private money lender assumes by funding this type of loan.

 

 


 

Why 30 year fixed rated rate loans are not popular commercial mortgages

There are a few specific reasons for this.

  • Not every commercial property type has a 30 year fixed mortgage program available. Most have a max loan amortization schedule of 20 or 25 years with shorter fixed rate periods. Lenders prefer to originate loans with shorter amortization periods and shorter fixed periods to lower their overall risk.
     
  • Lenders increase their spreads for longer term loans to account for "market-risk," thereby creating higher interest rates for borrowers. During the first quarter of 2016 a 30 year fixed commercial mortgage could be as high as the mid 5%'s to low 6%'s. Historically speaking, these are still good rates. But they are noticeably higher than current 30 year residential rates and definitely higher than loan programs with shorter fixed rate periods.
     
  • Commercial mortgages are subject to prepayment penalties in the form of step-down prepays, yield maintenance or defeasance penalties. The longer the commercial fixed rate period, the longer a borrower's prepay period will be. Having a prepay penalty limits an investment property owner's financial flexibility and ability to react to real estate market conditions.

 


 

Why commercial real estate owners are not focused on paying off their commercial mortgage

When it comes to commercial properties, an owner's focus is to maximize a property's returns and value rather than trying to eliminate its mortgage. Because of this, commercial real estate investors have less reason to hold onto a mortgage until maturity than a homeowner would.  Depreciation schedules, cashing out equity for additional property purchases, interest tax deductions, and transfer of ownership are just a few factors an investor takes into consideration when deciding what type and how long to keep financing on a commercial property.

 


 

What affects the commercial mortgage rates?

Internally, a borower's "credit risk", the returns a lender requires to justify a loan against credit risk, the subject property offered as collateral, and the lender's lending strategy are the main influencers in determing their commercial mortgage rate.  Externally, a wide variety of economic factors like new housing construction data, Federal Reserve news/reports, jobless claims, international economies, inflation, corporate quarterly earnings reports and futures reports can impact the interest rate climate. Other, less tangible factors like geopolitical unrest or volatile markets further complicate what a "standard rate" might be. When interest rates are high, banks are more incentivized to make loans, and the reverse is true in a tight interest rate environment.

 


 

In Need of Alternative Commercial Financing? Riverdale Funding Can Help

If you need a commercial property bridge loan, Riverdale Funding is an experienced hard money lender whose management team has over 35 years of experience.

Call us today 1-888-368-4983 or contact us now.
 

 

Article First Posted on: Nov 16th 2016. Last Updated on: November 8, 2017

This article is a part of our Getting a Commercial Loan: Complete Guide, a comprehensive resource for anyone looking to secure a commercial loan. Read more at the link.