What Is The Current Commercial Mortgage Rate | Riverdale Funding

What Is The Current Commercial Mortgage Rate

Sep 05, 2017

 

Current Commercial Mortgage & Loan Rate for September 2017

Conventional Lender - Debt Market Rates and Terms

 

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.  Note: These rates are not representative of the 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%  3.60% to 4.45%   55% to 75% 3.51% to 4.42%
7 Yea5   55% to 75% 3.75% to 4.59%   55% to 75% 3.80% to 4.64%
10 Year   55% to 75% 3.90% to 4.80%   55% to 75% 3.95% to 4.80%

Rates shown above are as of September 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%  3.41% to 4.05%   55% to 75% 3.34% to 4.00%
7 Year   55% to 75% 3.70% to 4.30%   55% to 75% 3.60% to 4.25%
10 Year   55% to 75% 3.85% to 4.51%   55% to 75% 3.74% to 4.42%

Rates shown above are as of September 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%  3.44% to 4.14%   55% to 75% 3.32% to 4.08%
7 Year   55% to 75% 3.66% to 4.39%   55% to 75% 3.60% to 4.42%
10 Year   55% to 75% 3.86% to 4.54%   55% to 75% 3.77% to 4.50%

Rates shown above are as of September 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.

 

 


 

Because there are so many advertisements for residential mortgages, those types of real estate loans are what most people are familiar with. This can make it confusing for a commercial borrower to know if a commercial mortgage rate is competitive.  If you are a borrower, whether you're looking to get a commercial mortgage to purchase an investment property or perhaps refinance a commercial property, understanding commercial mortgage rates are essential.

To begin, one must understand that commercial properties cannot be classified together as easily as residential properties.  There are multiple types of commercial properties and financing circumstances. These differences affect the commercial mortgage rate and loan terms a lender will offer.  This means the mortgage rate for a person's home and a commercial property can vary greatly.

3, 5, 7, and 10-year fixed loans with either 25 or 30-year amortizations are the most popular commercial mortgage rate programs.

In comparison, during the first quarter of 2016, the average 30-year fixed home mortgage rate offering to a qualified borrower, was 3.74%.  Lower rates could be had for home mortgages with lower fixed rate periods. Residential loans usually come in terms of 30, 15, 10 or 5 years fixed - with the 30-year being the most popular.

 


 

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.

 


 

Something to Keep in Mind

Commercial mortgage rates are typically higher than residential mortgage rates with the same fixed period.  However, commercial mortgage rates are still near their historic lows.  Moreover, an important factor to keep in mind is commercial properties are supposed to produce income, whereas a personal residence usually does not. This changes the "value equation" and is an important distinction to be made when evaluating a residential mortgage rate and a commercial mortgage rate.

 


 

What affects the commercial mortgage rates?

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: September 5, 2017