Tap to get financing
CMBS Loans
Property types
Mobile Home Park CMBS LoansHospital CMBS LoansIndustrial CMBS LoansHotel CMBS LoansRetail CMBS LoansSelf-Storage CMBS LoansMixed-Use CMBS LoansOffice CMBS LoansApartment CMBS LoansCMBS Property Types
Loan basics Loan terms
Resources
BlogCommercial InsuranceLoan Documents
For Brokers
About
TeamLeadership
(561) 556-2121
Get financing →
Newly Published
Jul 3 at CMBS Loans
Business Interruption Insurance for CMBS-Financed Properties
Jul 3 at CMBS Loans
Liability Insurance for CMBS-Financed Commercial Properties
Jul 1 at CMBS Loans
Property Insurance for CMBS-Backed Commercial Real Estate
Explore the Janover Network
Jun 16 at Multifamily Loans
How to Package Deals That Get Lenders Competing for Your Business
Jun 13 at Multifamily Loans
Why Most Investors Shop for Financing Wrong (and How to Fix It)
Jun 12 at Multifamily Loans
The Multifamily Investor's Playbook for Working With Non-Bank Lenders
Was This Article Helpful?
CMBS Loan Secrets
1 min read

Lockouts in Relation to CMBS Loans

For borrowers, prepayment penalties can be one of the most challenging aspects of CMBS loans. In addition to prepayment penalties, however, most conduit loans have a lockout period, a period of time in which the loan cannot be prepaid at all.

Start Your Application and Unlock the Power of Choice Experience expert guidance, competitive options, and unparalleled industry expertise.
Click Here to Get Quotes →
$5.6M offered by a Bank$1.2M offered by a Bank$2M offered by an Agency$1.4M offered by a Credit UnionClick Here to Get Quotes!

Conduit Loan Lockouts Prevent Repayment for Specific Periods

For borrowers, prepayment penalties can be one of the most challenging aspects of CMBS loans. In addition to prepayment penalties, however, most conduit loans have a lockout period, a period of time in which the loan cannot be prepaid at all. The vast majority of conduit loans have lockout periods of between 2 and 5 years. Despite that, even CMBS loans with shorter lockout periods are still typically are locked out from the period between securitization and sale on the secondary market, which typically takes a few months.

After the lockout period is over, the borrower can usually prepay the loan using either yield maintenance or defeasance, depending on the terms of the loan agreement. Yield maintenance involves paying a specific fee, often between 1-3%, in addition to the remaining loan balance, in order to prepay the loan. In comparison, defeasance involves purchasing replacement securities (often U.S. Treasury bonds) to replace the collateral and interest income that the conduit loan provided.

Related Questions

What is a CMBS loan lockout period?

A CMBS loan lockout period is a period of time in which the loan cannot be prepaid at all. The vast majority of conduit loans have lockout periods of between 2 and 5 years. Despite that, even CMBS loans with shorter lockout periods are still typically are locked out from the period between securitization and sale on the secondary market, which typically takes a few months.

Source: cmbs.loans/blog/cmbs-lockouts

What are the benefits of a CMBS loan lockout period?

CMBS loan lockout periods can provide borrowers with a number of benefits. For one, they can help protect lenders from borrowers who may be tempted to refinance their loan too soon. Lockout periods also provide borrowers with a certain amount of security, as they know that their interest rates won't suddenly increase a day or two before closing. Additionally, many lenders offer 30-day rate locks on certain CMBS loans, which can help reduce a borrower's financial risk.

Sources:

  • cmbs.loans/blog/cmbs-lockouts
  • cmbs.loans/blog/rate-locks
  • www.commercialrealestate.loans/cmbs-loans

What are the risks associated with a CMBS loan lockout period?

The risks associated with a CMBS loan lockout period include difficulty releasing collateral, expensive exit costs, dealing with a master servicer may be challenging for borrowers, reserves required, secondary financing is sometimes prohibited, loans are fully assumable, and legal fees can be particularly expensive.

Difficulty releasing collateral is a risk associated with CMBS loan lockout periods because the borrower is unable to prepay the loan during the lockout period. Expensive exit costs are also a risk, as the borrower may need to pay a fee of 1-3% in addition to the remaining loan balance in order to prepay the loan. Dealing with a master servicer may be challenging for borrowers, as the servicer is responsible for managing the loan and ensuring that all payments are made on time. Reserves are also required, as the borrower must have enough funds to cover any potential losses or defaults. Secondary financing is sometimes prohibited, as the loan agreement may not allow for additional financing. Loans are also fully assumable, meaning that the borrower is responsible for any payments made by the new borrower. Finally, legal fees can be particularly expensive, as the borrower must pay for any legal services related to the loan.

How can I avoid a CMBS loan lockout period?

The best way to avoid a CMBS loan lockout period is to negotiate a shorter lockout period with your lender. Most conduit loans have lockout periods of between 2 and 5 years, but some lenders may be willing to offer a shorter lockout period. Additionally, many lenders offer 30-day rate locks on certain CMBS loans, which can help reduce your financial risk.

For more information, please see the following sources:

  • CMBS Lockouts
  • Rate Locks in Relation to CMBS Loans
  • CMBS Loans for Commercial Real Estate

What are the alternatives to a CMBS loan lockout period?

The alternatives to a CMBS loan lockout period are yield maintenance and defeasance. Yield maintenance involves paying a specific fee, often between 1-3%, in addition to the remaining loan balance, in order to prepay the loan. In comparison, defeasance involves purchasing replacement securities (often U.S. Treasury bonds) to replace the collateral and interest income that the conduit loan provided.

Sources:

  • cmbs.loans/blog/cmbs-lockouts
  • www.commercialrealestate.loans/cmbs-loans
In this article:
  1. Conduit Loan Lockouts Prevent Repayment for Specific Periods
  2. Related Questions
  3. Get Financing
Categories
  • CMBS Loans
  • Conduit Loans
Tags
  • CMBS Loans
  • Conduit Loans
  • Conduit Financing
  • CMBS Financing
  • CMBS Lockouts
  • CMBS Prepayment

Getting commercial property financing should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →

Janover: Your Partner in Growth

At Janover, we offer a wide range of services tailored to your unique needs. From commercial property loans and LP management to business loans and services for lenders, we're here to help you succeed.

Learn more about Janover →
Commercial Property Loans

Get the best CRE financing on the market.

Explore Financing Options →
LP Management

Syndicate deals on autopilot with Janover Connect.

Discover LP Management →
Business Loans

Match with the right kind of loan, in record time.

Find Business Loans →
For Lenders

Supercharge your loan pipeline. Unlock more deals.

Boost Your Loan Pipeline →
CMBS Loans

CMBS Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Commercial Real Estate Loans, SBA7a Loans, HUD Loans, Janover Insurance, Janover Pro, Janover Connect, and Janover Engage.

Janover Tech Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487
(561) 556-2121 
hello@cmbs.loans

Property types

Mobile Home Park CMBS Loans
Hospital CMBS Loans
Industrial CMBS Loans
Hotel CMBS Loans
Retail CMBS Loans
Commercial Mortgage Calculator
For Commercial Mortgage Brokers

Self-Storage CMBS Loans
Mixed-Use CMBS Loans
Office CMBS Loans
Apartment CMBS Loans
CMBS Property Types
Commercial Loan Rates
For Commercial Mortgage Brokers

Site Information

Privacy Policy
Terms of Use


For Commercial Mortgage Brokers

This website is owned by a company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We have no affiliation with any government agency and are not a lender. We are a technology company that uses software and experience to bring lenders and borrowers together. By using this website, you agree to our use of cookies, our Terms of Use and our Privacy Policy. We use cookies to provide you with a great experience and to help our website run effectively.

Freddie Mac® and Optigo® are registered trademarks of Freddie Mac. Fannie Mae® is a registered trademark of Fannie Mae. We are not affiliated with the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), Freddie Mac or Fannie Mae.

This website utilizes artificial intelligence technologies to auto-generate responses, which have limitations in accuracy and appropriateness. Users should not rely upon AI-generated content for definitive advice and instead should confirm facts or consult professionals regarding any personal, legal, financial or other matters. The website owner is not responsible for damages allegedly arising from use of this website's AI.

Copyright © 2025 Janover Tech Inc. All rights reserved.

+

Fill out the form below and get the pricing and terms banks can't compete with.