Commercial Mortgage Rates and How they're Calculated

First and foremost; the major difference between Commercial/Multifamily Interest rates and Residential Rates are - Most Commercial Interest Rates are Fixed from between 2 to 10 years. Commercial loans will never be 30 yrs due in 30. 

You can however obtain Fully Amortized 15/15 commercial money but the longer the fixed term the higher the rate and visa versa.  On average, commercial loans are  Amortized for 20 to 25 years, with some commercial banks going to 30 yrs.  Commercial Rates vary widely from lender to lender and Property to Property. 

Commercial Rates are not as conforming from lender to lender  as their Residential counterpart.  There are four distinct categories of Commercial Lender;

1. Conduit (CMBS) lenders
2. Commercial Banks
3. Local Bank (Full Recourse on the borrower)
4. Stated Income/Stated Asset lenders (sometimes called Hard or Private Money)

Commercial Rates will rarely be based on your personal past credit history unless you are applying for a SMALL BALANCE COMMERCIAL LOAN up to $500,000 for say an Apartment Building purchase or refinance.  

A Commercial Buildings Final Appraised Valuation will be based largely on four key elements;

• Analysis of the buildings Past Operating Performance
• Tenant Strength, History and Lease Terms
• Property Characteristics and Conditions
• Local Market Attributes

No reputable Commercial Lender or Broker can ethically and honestly quote Any real numbers or interest rate WITHOUT FIRST PERFORMING A CURSORY ANALYSIS and overview of the PROPERTY AND FINANCIALS to support an accurate quote that will get you what you really need; The Letter of Intent from the lender/investor.  Always ask for a copy of the Letter of Intent to fund/purchase the loan or (L.O.I.) from a reputable Commercial Lender/Investor.

Some of the Best Commercial Rates are currently 1 to 1.5% over conv. SFR rates.  These Lowest Commercial Rates typically have an initial fixed term of 1, 2, 3 up to 5 yr. fixed term and amortized over 300 months. At the other end of the spectrum - you have your assorted Hard Money Private Funds. These loans have a wider spectrum of rate range based on Equity and Risk of the borrower and collateral used with rates commonly between upper single digits to 12% range.                                                                                                                             

Any reputable Commercial Mortgage Broker with Experience would agree to this caveat; Watch out for generic off-sheet low-balled Quotes from anyone giving out rate quotes prior to checking into what you and the property qualify for.  That only insults your intelligence you and wastes your time.  If you are interested in working with a knowledgable Commercial Expert who's committed to earning your business today and in the future, then this is the perfect time to contact us to get started on putting together the right Commercial loan for your particular needs!