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.
Prepayment Penalties for CMBS Loans
If you take out a CMBS loan, and you want to pay off the loan early, perhaps because you’re selling the property, you’ll usually have to pay a prepayment penalty. Prepayment penalties are designed to compensate the lender, or, in the case of CMBS loans, the investors, for the loss of income that will result from a borrower paying off their loan early.