Updated January 19, 2019
Commercial property mortgage rates are almost always higher than residential mortgage rates. This is simply because commercial loans have inherently more risk.
|Type Of Commercial Loan||Average Loan-To-Value (LTV)||Average Current Rate|
|Conventional Bank Loan||70% - 80%||3.5% - 8%|
|SBA 504 Loan||80% - 90%||4.5% - 5.5%|
|SBA 7(a) Loan||80% - 90%||6% - 8.5%|
|Life Company Loan||60% - 75%||3.5% - 4.5%|
|CMBS Loan||70% - 75%||3.5% - 5.5%|
|USDA Loan||80% - 85%||5.5% - 6.5%|
|Fannie Mae Multifamily Loan||70% - 80%||4% - 5.5%|
|Soft Money||60% - 65%||6.5% - 12%|
|Commercial Hard Money Loan||50% - 55%||10% - 21%|
Lenders determine today’s commercial mortgage rates using a number of factors including:
LOAN-TO-VALUE – the amount you are borrowing relative to the value of the property
DEBT SERVICE COVERAGE RATIO – your ability to pay the loan each month
RATE SPREAD – the amount your lender charges over the prime rate or a specific interest rate swap.
The best way to find current commercial mortgage rates is to first determine what your commercial lending options are. I have included the following lender/loan type roundup to make your search simpler:
3.75% – 4.75%*
Life insurance companies have historically offered the lowest rates on commercial loans but are often difficult to get. Companies like Prudential and MetLife offer commercial property loans with relatively low rates if you can qualify.
These loan amounts usually have a $5 million minimum and are limited to properties that are less than 20 years old.
3.80% – 5.75%*
Conduit CMBS lenders offer competitive commercial mortgage rates based on comparable “on the run” rates plus a lender specific spread.
COMMERCIAL BANKS/CREDIT UNIONS
3.70% – 6.00%*
Commercial banks and credit unions offer a wide range of competitive commercial mortgage rates depending upon your property type and the length of your loan.
Funding is provided for non-owner investment properties, 51% owner occupied as well as special purpose commercial properties.
SBA 7(a) + SBA 504
4.40% – 6.25%* / 4.00% – 5.30%*
SBA commercial property loans are set by the Small Business Administration. The SBA establishes a maximum that designated lenders can charge above a specified base rate.
SBA 7 (a) loans are variable rate instruments and currently carry a maximum rate spread of 2.75%.
SBA 504 loans are fixed rate instruments with rates that are determined by monthly debenture bond sales.
USDA B&I LOANS
5.70% – 6.50%*
USDA Business and Industry loans are partially-guaranteed by the Federal Government and designed to promote job growth in rural areas.
Variable and fixed rates are available at similar interest rates to the SBA loan program.
USDA loans offer loan maximums up to $25 million along with the ability to finance non-owner occupied commercial properties.
6.50% – 18.00%*
Soft money commercial real estate loans act as a hybrid between traditional and hard money loans.
Soft money lenders normally provide lower rates and longer terms (6 months to 5 years) than hard money funding sources.
These lenders also provide a wider range of financing terms since they are normally funded by private investors.
10.00% – 21.00%*
Commercial hard money loans have the highest interest rates of all available commercial loan types. These are usually interest only loans that range from 3 to 18 months.
Normally used for short term financing needs that require a quick closing.
Origination fees can be quite high, ranging anywhere from 2 to 10 points, depending upon your financial situation and loan-to-value.
COMMERCIAL MORTGAGE RATES INFOGRAPHIC
*The above rates should only be used as a guide to get a quick overview of current commercial mortgage interest rates. Rates are subject to daily changes and vary greatly with different lenders and borrower types.