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CMBS Loan Secrets
Last updated on Mar 17, 2023
2 min read

Refinancing CMBS Loans: What You Need to Know

Since the vast majority of CMBS loans are not fully amortizing, CMBS borrowers typically face hefty balloon payments when the term of their loan is up. If you’re a CMBS borrower who’s about to face a big balloon payment, refinancing your loan is often the best solution. And, when it comes to refinancing, you have a variety of options.

In this article:
  1. CMBS Loan Refinancing: The Basics
  2. Refinance Calculator
  3. CMBS Refinancing Options Include Bank Loans, Private Lenders, and New CMBS Loans
  4. Related Questions
  5. Get Financing
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CMBS Loan Refinancing: The Basics

Since the vast majority of CMBS loans are not fully amortizing, CMBS borrowers typically face hefty balloon payments when the term of their loan is up. If you’re a CMBS borrower who’s about to face a big balloon payment, refinancing your loan is often the best solution. And, when it comes to refinancing, you have a variety of options.

Refinance Calculator

CMBS Refinancing Options Include Bank Loans, Private Lenders, and New CMBS Loans

One of the most common ways to refinance a CMBS loan at maturity is through a traditional bank loan. However, if you initially took out a CMBS loan due to the fact that you had trouble getting bank financing because of credit problems or insufficient collateral, you’ll likely need to resolve those issues before becoming eligible.

If bank financing requirements are too rigid for your needs, you may want to look into getting a CRE loan from a private lender. In most cases, private CRE loans are short-term deals, but some longer-term loans do exist. For borrowers with lower credit scores, hard money lenders may be the best option, but for better-positioned borrowers, a “soft money” loan may be able to provide lower interest rates and better loan terms.

Finally, if you find that bank loans and loans from private lenders aren’t the right fit for your needs, you may want to consider refinancing with another CMBS loan. Your new CMBS loan will likely have most of the benefits of your old CMBS loan— including having competitive interest rates, being fully non-recourse and fully assumable. Of course, it will also likely have many of the drawbacks, such as having somewhat strict prepayment penalties and a general prohibition on supplemental financing. And, if you’ve built up enough equity in your property during your loan term, you may even be able to complete a cash-out refinance.

Related Questions

What are the benefits of refinancing a CMBS loan?

Refinancing a CMBS loan can provide a variety of benefits, including competitive interest rates, being fully non-recourse and fully assumable, and the potential for cash-out refinance. Additionally, CMBS financing generally has longer terms and longer amortizations than bank financing, which often has five-year terms with 10- to 20-year amortizations. Finally, CMBS loans are far more focused on a property's financials than a borrower's credit, which makes them easier to get approved.

Sources:

  • Refinancing CMBS Loans: What You Need to Know
  • Refinancing Commercial Real Estate Loans

What are the risks associated with refinancing a CMBS loan?

Refinancing a CMBS loan can be a great way to get access to cash or to extend the term of your loan. However, there are some risks associated with refinancing a CMBS loan that you should be aware of. These include:

  • Higher interest rates: CMBS loans typically have higher interest rates than bank loans, so you may end up paying more in interest over the life of the loan.
  • Strict prepayment penalties: CMBS loans often have strict prepayment penalties, which can make it difficult to refinance or pay off the loan early.
  • General prohibition on supplemental financing: CMBS loans generally prohibit supplemental financing, which can limit your ability to borrow additional funds.

It's important to weigh the risks and benefits of refinancing a CMBS loan before making a decision. If you have any questions, you should consult a qualified commercial real estate financing advisor.

What are the steps involved in refinancing a CMBS loan?

The steps involved in refinancing a CMBS loan depend on the type of loan you are looking for. Generally, you will need to consider your options, such as bank loans, private lenders, and new CMBS loans. You may also need to resolve any credit issues or insufficient collateral before becoming eligible for bank financing. Additionally, you may need to consider the benefits and drawbacks of the loan, such as competitive interest rates, non-recourse, and fully assumable, as well as prepayment penalties and a general prohibition on supplemental financing.

For more information, please refer to the following sources:

  • Refinancing CMBS Loans: What You Need to Know
  • Refinancing Commercial Real Estate Loans

What are the costs associated with refinancing a CMBS loan?

The costs associated with refinancing a CMBS loan depend on the type of loan you choose. For example, if you choose to refinance with a traditional bank loan, you may be subject to origination fees, closing costs, and other fees associated with the loan. If you choose to refinance with a private lender, you may be subject to higher interest rates and fees. If you choose to refinance with another CMBS loan, you may be subject to prepayment penalties and other fees associated with the loan.

For more information, please see the following sources:

  • Refinancing CMBS Loans: What You Need to Know
  • Refinancing Commercial Real Estate Loans

What are the best strategies for refinancing a CMBS loan?

The best strategies for refinancing a CMBS loan depend on the borrower's needs and creditworthiness. Generally, the most common way to refinance a CMBS loan is through a traditional bank loan. However, if the borrower had difficulty getting bank financing due to credit problems or insufficient collateral, they may need to resolve those issues before becoming eligible.

If bank financing requirements are too rigid, the borrower may want to look into getting a CRE loan from a private lender. Private CRE loans are usually short-term deals, but some longer-term loans do exist. For borrowers with lower credit scores, hard money lenders may be the best option, but for better-positioned borrowers, a “soft money” loan may provide lower interest rates and better loan terms.

Finally, if bank loans and loans from private lenders aren’t the right fit, the borrower may want to consider refinancing with another CMBS loan. This new CMBS loan will likely have most of the benefits of the old CMBS loan, including competitive interest rates, being non-recourse and fully assumable. It will also likely have some drawbacks, such as having somewhat strict prepayment penalties and a general prohibition on supplemental financing. If the borrower has built up enough equity in their property during the loan term, they may even be able to complete a cash-out refinance.

In this article:
  1. CMBS Loan Refinancing: The Basics
  2. Refinance Calculator
  3. CMBS Refinancing Options Include Bank Loans, Private Lenders, and New CMBS Loans
  4. Related Questions
  5. Get Financing
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  • CMBS Loans
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  • CMBS Financing
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  • CMBS Refinancing
  • CMBS Cash-out Refinance

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