Can You Refinance Part of a Mixed-Use Property With a CMBS Loan?
While in most cases, CMBS loans are only allowed for individual properties or groups of properties, in some cases, one part of a mixed-use property may be eligible for CMBS refinancing. For example, if a mixed-use property is divided into residential a residential section, featuring apartments, and a retail condominium section, each owned separately, a borrower may be able to get a conduit loan to refinance only one section of the property.
What is a Conduit Loan?
Conduit loans, also known as CMBS loans, are commercial real estate loans that are pooled together with similar commercial mortgages and sold on the secondary market. CMBS loans are known for their relaxed credit requirements, but are only available for income-generating properties, and cannot typically be used as land or construction loans.
CMBS Loan Rates: What are the Interest Rates for CMBS Loans?
Conduit loan rates are typically based on the U.S. Treasury rate, plus a margin, or spread, designed to compensate the lender/investors for their risk. As of October 2018, the 10-year U.S. Treasury rate was 3.18%, so, for example, if the margin on a CMBS loan was 2%, the interest rate would be approximately 5.18%. CMBS loan spreads are influenced by a variety of factor
Who are the Top CMBS Lenders?
If you’re on the market for a conduit loan, you may want to know who the biggest players in the lending game are— in essence, who you might be getting a loan from. In 2017, some of the biggest CMBS lenders in the U.S. included Goldman Sachs, JP Morgan, Deutsche Bank, and Morgan Stanley.
Debt Service Coverage Ratio (DSCR) in Relation to CMBS Loans
Debt Service Coverage Ratio, or DSCR, is one of the key metrics that lenders use when determining a borrower’s eligibility for a CMBS loan. DSCR can be calculated by dividing a property’s net operating income (NOI), with its annual debt service (including principal, interest, taxes, and related costs).
Are CMBS Loans Assumable?
In most cases, CMBS loans are fully assumable, though a small fee must often be paid. This is a huge advantage for CMBS borrowers, since one of the main disadvantages of CMBS financing is the difficulty of exiting the loan early.
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.
What are CMBS Spreads?
A CMBS credit spread is defined as the difference in yield between a U.S. treasury bond and a specific commercial mortgage backed security.