Commercial mortgage rates (and the nebulous factors that affect them) can be a tough nut to crack. Before taking responsibility for large sums of money, borrowers want to understand this complex process and how they can find the best financing terms available to them.
The problem, it seems, is that there are so many factors and conditions influencing the determination of loan rates and terms that it becomes difficult to gain a comprehensive view of the process, especially given the frequency of rate changes. In this guide, the Finance Lobby team hopes to help clear up common confusions and concerns regarding commercial mortgages and CRE loan rates.
Commercial mortgage and CRE loan rates are subject to frequent change, making it difficult for both CRE borrowers and investors to stay up-to-date on the latest rates. Because many commercial real estate lenders’ interest rates are set according to indexes determined by HUD (the US Department of Housing and Urban Development) and the Fed, CRE loan rates can change daily – sometimes multiple times per day.
CRE loans typically feature interest rates at a higher premium than other loans due to the increased degree of risk associated with them. Commercial mortgage rates are notably higher than residential mortgage rates (with a few exceptions); banks tend to feel more cautious lending large sums of money for uncertain investments, leading them to set commercial mortgages at a much higher rate than those of residential properties.
The Fed has one of the largest hands in shaping interest rates for commercial loans. Its quantitative easing program has been dropping commercial bank lending rates since the early 2010s, which in turn has made borrowing and buying properties more accessible for businesses. Some CRE loan rates are determined by “prime rates” set by the Fed while others are linked to variable factors like Treasury Bond yields, the Secured Overnight Financing Rate, the London Interbank Offered Rate, and more.
Oftentimes, loan and interest rates are shaped by a wide range of market factors.
Here, you’ll find answers to a few of the questions we hear most about commercial mortgages and CRE loans:
With a multitude of banks and other commercial mortgage lenders to choose from, you have plenty of options when it comes to finding the best mortgage and loan terms based on your specific property, location, and business strategy. If you’d prefer an alternative CRE lender to private lending companies and banks, you can work with government agencies, debt funds, credit unions, insurance companies, and more to find a commercial real estate lender that can meet your needs.
Sometimes, a tried and true old-school approach is your best bet to finding what you need. Calling around and gathering quotes from various commercial mortgage lenders to compare can be one of the most direct ways to assess your options and find the perfect CRE lender for your commercial mortgage or loan.
The mechanics of commercial mortgage rates may be complicated, unpredictable, and difficult to wrap your head around, but that doesn’t mean that CRE borrowers and investors should just give up. You should always do your due diligence: research, compare your options, and take your time before making a decision. Never let ignorance or convenience guide your judgment; locking yourself into the wrong deal can cause much greater problems later down the line, stalling your growth and limiting your potential.
We hope to have clarified a few of the more puzzling aspects of the commercial mortgage process. The world of CRE mortgages comes with a host of terms and fluctuating commercial mortgage rates that can seem difficult at first, but before long, you will understand it and be a pro. If you still have questions, don’t worry. Finance Lobby, an experienced name in the CRE space, can help you to navigate this multifaceted process. Finance Lobby is committed to educating consumers about every aspect of the commercial real estate trade,
Finance Lobby is an online CRE lending marketplace that is making it faster and more efficient for commercial real estate brokers and lenders to find their perfect deals. Users are able to set their perfect terms and receive notifications of relevant deals. The Finance Lobby platform also enables CRE brokers and lenders to manage soft quotes, deals, schedules, and communication all in one place. It is the solution to days that are spent chasing dead-end leads.
To learn more about Finance Lobby, including how it can help you to spend time on the things that matter the most, please see https://financelobby.com/.