CMBS Support: Good Information to Have
If you’re looking for a commercial real estate loan and you’re not planning on prepaying your financing, CMBS loans provide you with a great opportunity to save on interest. These loans are a bit different from traditional loans because they are pooled together with other similar loans and sold to investors. This adds a lot of liquidity to the commercial real estate market by providing a new financing path and a wonderful opportunity for entrepreneurs in the credit market.
If you’re applying for one of these loans, it’s important to understand how they compare to a traditional real estate loan. Like a traditional loan, they are typically fixed-rate products with terms of 10 or 20 years. Some lenders may offer 30-year loans, but these are more available for residential properties than for commercial ones. Unlike a traditional loan, though, there are likely to be restrictions on prepayment. That’s necessary to ensure the loan is attractive to investors, who want to know they will be receiving income for most if not all the life of the loan.
CMBS loans vary from lender to lender. Where one program will restrict prepayment entirely, another might only restrict it for the first half or first quarter of the loan. Interest savings tend to parallel payment restrictions on these loans, so keep that in mind as you weigh how much prepayment restriction you’re willing to accept. The more restriction you accept, generally, the lower your interest rate will be. This can provide a substantial savings over the life of the loan, making this a great financing option for any business that does not intend to pay the loan early.
The other major consideration is the loan servicer. Since these loans are typically sold to investors, the institution that collects your payment and provides customer service will not actually be responsible for your debt. Sometimes, that can make the customer service experience rough. To find a lender or servicer who will be able to support your business throughout the repayment process, you need to look for an industry leader with a track record of providing successful businesses with the funding they need to make investments.
Remember, every real estate purchase provides you with new challenges and opportunities, so the funding that works for one might not be the best choice for the next. Even if you’ve had success with other financing structures before, the next purchase you make could benefit from the interest savings and customer service support you will get from a great CMBS loan program. These loans are widely available, and they represent your best chance to save thousands in interest payments over the life of your loans.