Rate Locks in Relation to CMBS Loans
Unlike other types of large real estate loans, getting an early or extended rate lock on a CMBS loan is pretty much unheard of. However, many lenders do offer 30-day rate locks on certain CMBS loans in order to make their loan products more attractive to potential borrowers.
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One of the few major downsides of CMBS loans is their reputation for lenders re-pricing the loan just days before closing. Unlike other types of large real estate loans, getting an early or extended rate lock on a CMBS loan is pretty much unheard of. However, many lenders do offer 30-day rate locks on certain CMBS loans in order to make their loan products more attractive to potential borrowers. As a borrower, this can help reduce your financial risk— and, could help you sleep better at night, since you know that your interest rates won’t suddenly skyrocket a day or two before closing.
Related Questions
What is a CMBS loan rate lock?
A CMBS loan rate lock is a feature offered by some lenders that allows borrowers to lock in an interest rate for a period of time, usually 30 days. This can help reduce the financial risk of the loan, as the interest rate won't suddenly increase before closing. CMBS loans typically have higher interest rates than other types of large real estate loans, and the rate lock can help make them more attractive to potential borrowers.
For more information on CMBS loans, please see https://www.commercialrealestate.loans/cmbs-loans and https://cmbs.loans/blog/rate-locks.
How does a CMBS loan rate lock work?
Most CMBS loans use fixed interest rates, which benefit borrowers by providing stable, projectable income for investors who have purchased the mortgage-backed securities. Many lenders offer 30-day rate locks on certain CMBS loans in order to make their loan products more attractive to potential borrowers. This can help reduce the borrower's financial risk and provide peace of mind that their interest rates won’t suddenly skyrocket a day or two before closing.
What are the benefits of a CMBS loan rate lock?
CMBS loan rate locks can help reduce a borrower's financial risk, since they know that their interest rates won't suddenly skyrocket a day or two before closing. Many lenders offer 30-day rate locks on certain CMBS loans, which can make their loan products more attractive to potential borrowers. Rate locks can also be beneficial for borrowers who want to get an early or extended rate lock on a CMBS loan, which is usually unheard of. Life company loans can sometimes offer forward commitments and rate locks at application, while CMBS loan borrowers usually have to wait until funding. However, some CMBS lenders do offer 30-day rate locks, often for a small fee.
What are the risks associated with a CMBS loan rate lock?
The risks associated with a CMBS loan rate lock are that lenders may re-price the loan just days before closing, and that getting an early or extended rate lock on a CMBS loan is pretty much unheard of. Additionally, there are other risks associated with CMBS loans, such as 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.
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How long does a CMBS loan rate lock last?
CMBS loans typically offer 30-day rate locks in order to make their loan products more attractive to potential borrowers. This can help reduce the borrower's financial risk and provide peace of mind that their interest rates won’t suddenly skyrocket a day or two before closing. Source