What’s the Best Way to Get a CMBS Loan?

Commercial Mortgage Backed Security loans have been around since the 1990s. Also known as conduit loans, this commercial mortgage can be different than any other type of property loan. The CMBS combines many individual loans of varying sizes and types into a single pooled transaction. The loan is then transferred into a trust that issues bonds of differed yields, payment plans, and duration. The reason the CMBS type loan is popular with commercial lenders is that the pool of loans backed by bonds is typically worth more than the value of the loans. So, what is the best way to get a CMBS loan?

Research into which institutions offers CMBS type loans may be the first step necessary in obtaining a mortgage. Large banks may offer the loan, but they are not always the best option for competitive pricing. Consider looking into private lending companies and corporate investors to see what is offered locally.

Contacting more than one financial institution to request a quote can be beneficial and offer an overview of what type of CMBS loans are available in your area. To get started, provide information on the loan amount, type of property mortgage is requested for, and property location. A loan office may then be assigned to the case to help draw up terms. The contract terms may include prepayment penalties, loan length, and balloon payment amounts. Although many provisions of the agreement can be considered negotiable, many are not.

Interest rates are often very low for CMBS type mortgages, and the loans can leverage up to 75 percent of the property’s appraised value. The length of the loan is generally between 25 and 30 years, and most CMBS mortgages require a balloon payment at the end of the contract.

Be prepared to provide collateral for the CMBS loan when requested by the loan officer. Include documentation for the property, bonds, or buildings when offering collateral terms. Since the property and buildings can protect the loan company, the officer may ask for a tour before accepting the deeds. Consider your options carefully when using properties or buildings to secure a loan because once the terms of the loan have been agreed upon, they can not be changed without renegotiating and rewriting the entire contract with new provisions. Also, when your property is leveraged in a CMBS conduit loan, audited financial statements must be provided to the servicer every year.

Obtaining a CMBS loan can be an arduous process, but it can also be well worth the effort. If your commercial property has a million-dollar value, it may be worth your time to obtain a CMBS quote.

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