Commercial Mortgage-Backed Securities (CMBS) Loans

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Commercial mortgage-backed securities (CMBS loans) are a popular loan type for commercial real estate owners. They come with various advantages like fixed interest rates and nonrecourse financing options.

CMBS loans are typically packaged and sold to investors as bonds. These bundles vary in loan terms, amount and property types.

Fixed interest rates

CMBS loans typically feature fixed interest rates that are based on the US Treasury swap rate plus a margin, also known as the spread. This spread compensates lenders for taking on this risk and generates profits when the loan is securitized and sold to investors.

CMBS loans typically have terms of five to 10 years, though longer maturities may be available in exceptional circumstances. The length is determined by factors such as cash flow and credit risk.

CMBS loans typically feature an advantageous introductory payment period and prepayment penalties to encourage borrowers to make their payments on time. They may also include yield maintenance, which requires the borrower to cover any difference between their loan’s interest rate and U.S. Treasury yields for the remainder of the term. Furthermore, these loans may be subject to defeasance, which requires them to replace the original loan with another type of security or bond.


Non-recourse loans protect borrowers’ personal assets in case of loan default. Instead, lenders can seize only property pledged as security and sell it to recoup its outstanding balance.

Commercial mortgage lenders usually only provide non-recourse financing to qualified borrowers who meet certain sponsorship and net worth criteria. Furthermore, their credit scores as well as legal and financial history are taken into consideration when making this determination.

Non-recourse loans carry greater risk than recourse loans, so lenders will charge a much higher interest rate for this type of debt. Unfortunately, non-recourse commercial mortgages tend to be harder to qualify for and less accessible than the standard home equity lines most consumers are familiar with.

Commercial and multifamily construction loans often start as full recourse but convert to non-recourse once certain criteria are met, such as profitability or occupancy levels. This process is referred to as “burn-off.”


An assumable loan allows a buyer to assume the interest rate, repayment period and other terms of a seller’s existing mortgage without needing to apply for a new one. This can be beneficial for those looking to take advantage of lower interest rates and save money in the long run.

An assumable mortgage offers the greatest advantage, offering you a lower interest rate than you’d get with a new loan. To qualify, however, you must meet the lender’s minimum credit score requirements.

Loan assumption is a technique that permits borrowers to prepay their CMBS loans without incurring a penalty from the bond holders, who then reimburse the lenders. This can be especially advantageous for homeowners with substantial equity in their property and need to quickly sell it.

No continuity of lender

The CMBS game involves pooling mortgages together and selling them as commercial mortgage-backed securities (CMBS) to investors. As a result, there are no preexisting relationships between the lender and its borrowers; rather, the lender acts as either a master or special servicer to a securitization trust and its acolytes. CMBS lending has seen steady growth over the last few years despite some doomsday scenarios from not too distant ago.

Finding the right CMBS lender requires consulting an experienced commercial real estate attorney or financial planner. In addition, doing some research can pay dividends in the future; using a CMBS loan calculator will help identify which lender best meets your needs. Furthermore, be sure to note any relevant CMBS rules that pertain to your transaction; this will save you from unnecessary hassles down the line.

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