CMBS Loans | Conduit Financing for Commercial Real Estate

A CMBS loan (also called a conduit loan) is a type of commercial real estate financing where individual mortgages on income-producing properties are pooled together, securitized into bonds, and sold to investors on the secondary market. Because the risk is distributed across many investors, CMBS lenders can offer non-recourse terms with competitive fixed rates that portfolio lenders often can’t match.

CMBS loans are originated by commercial banks, investment banks, and specialized conduit lenders. Once originated, the loans are transferred to a trust called a Real Estate Mortgage Investment Conduit (REMIC), packaged into tranches based on risk and return, and sold to institutional investors. This securitization model is what enables the favorable borrower terms — but it also means loan modifications after closing are extremely difficult.

Non-Recourse Structure

No personal guarantee required. Borrower liability limited to standard “bad boy” carve-outs for fraud, environmental violations, and voluntary bankruptcy.

Fixed-Rate Terms

Lock in a fixed interest rate for 5–10 year terms with 25–30 year amortization schedules, providing long-term payment predictability.

Property-Focused Underwriting

Loan sizing based on DSCR, LTV, and debt yield — not borrower net worth or prior real estate experience.

Higher Leverage Available

Up to 75% LTV for qualified properties. Cash-out refinancing available, unlike many other CRE lending products.

Loan Assumability

CMBS loans can be assumed by a qualified buyer at sale, making properties more marketable and simplifying exits.

Interest-Only Options

Partial or full interest-only periods available for stabilized properties, improving initial cash flow during hold.

CURRENT RATES & TERMS

CMBS Loan Structures at a Glance

CMBS rates are priced as a spread over benchmark Treasury yields. Structures and terms vary by loan size, property quality, and market conditions.

Standard CMBS

Large Loan

Single Asset

Loan Size

$2M – $25M

$25M – $250M+

$100M+

Interest Rate

5.75 – 8.00%

5.50 – 7.00%

Negotiated

Maximum LTV

65 – 75%

60 – 70%

50 – 65%

Minimum DSCR

1.20x – 1.25x

1.25x – 1.35x

1.30x+

Debt Yield

8 – 10%

9 – 11%

10%+

Term Length

5 or 10 years

Custom

Amortization

25 – 30 years

Recourse

Non-recourse

Prepayment

Defeasance / YM

Negotiated

IO Period

0 – 3 years

2 – 5 years

Full or partial

QUALIFICATION REQUIREMENTS

What Lenders Look For in CMBS Deals

CMBS underwriting focuses primarily on property performance rather than borrower financials. The three key metrics — DSCR, LTV, and debt yield — determine loan sizing and approval.

1.20x – 1.25x

Minimum DSCR

Net Operating Income must cover annual debt service by at least 1.20x. Higher ratios unlock better rates and more favorable terms.

65% – 75%

Maximum LTV

Loan-to-value based on appraised value. Higher-quality assets in primary markets may qualify for higher leverage.

8% – 10%+

Minimum Debt Yield

NOI ÷ Loan Amount. The key risk metric for conduit lenders. Properties with higher debt yields are more likely to be approved.

90%+

Occupancy Rate

Stabilized occupancy preferred. Properties with less than 85% occupancy typically require bridge financing first.

All Major Types

Eligible Property Types

Multifamily, office, retail, industrial, warehouse, self-storage, hospitality, and mixed-use properties are all eligible.

Minimal

Borrower Requirements

Unlike bank loans, CMBS lenders place less emphasis on borrower net worth and real estate experience. Credit and background checks still apply.

LOAN COMPARISON

CMBS vs. Bank Loans vs. Agency Loans

Understanding how CMBS compares to other CRE financing options helps you choose the right structure for your deal.

RECOMMENDED FOR INVESTORS

CMBS / Conduit

RecourseNon-recourse

Rate TypeFixed

Max LTV75%

Min Loan$2M

FlexibilityLow

PrepaymentDefeasance / YM

Best ForStabilized assets

TRADITIONAL

Bank / Portfolio

RecourseFull recourse

Rate TypeFixed or variable

Max LTV80%

Min Loan$500K

FlexibilityHigh

PrepaymentNegotiable

Best ForRelationship banking

MULTIFAMILY ONLY

Agency (Fannie/Freddie)

RecourseNon-recourse

Rate TypeFixed or variable

Max LTV80%

Min Loan$1M

FlexibilityMedium

PrepaymentYield maintenance

Best ForApartments 5+ units

FREQUENTLY ASKED QUESTIONS

CMBS Loan FAQ

What is the minimum loan amount for a CMBS loan?

Standard conduit CMBS loans typically start at $2 million, though some lenders will consider deals as low as $1.5 million. Large loan CMBS programs start at $25 million and can exceed $250 million for single-asset deals.

What does “non-recourse” actually mean?

Non-recourse means the lender cannot pursue the borrower’s personal assets if the loan defaults. However, “bad boy” carve-outs exist — if the borrower commits fraud, files bankruptcy voluntarily, or violates environmental laws, the loan can become full recourse.

Can I pay off a CMBS loan early?

CMBS loans have strict prepayment protections, typically either yield maintenance or defeasance. Yield maintenance requires compensating the lender for lost interest. Defeasance requires purchasing a portfolio of Treasury securities to replace the loan’s cash flows. Both are expensive. Use our Yield Maintenance and Defeasance calculators to estimate costs.

How long does CMBS loan approval take?

From application to closing, a typical CMBS loan takes 45–90 days. The process includes underwriting (2–3 weeks), third-party reports (appraisal, environmental, engineering), legal documentation, and rating agency review before securitization.

Can I modify a CMBS loan after closing?

Loan modifications on CMBS are extremely difficult because the loan has been securitized and sold to bondholders. Any modification requires special servicer approval and must meet strict REMIC trust guidelines. This inflexibility is one of the most significant trade-offs of CMBS financing.

What property types qualify for CMBS?

Most income-producing commercial properties qualify: multifamily, office, retail, industrial, warehouse, self-storage, hospitality, and mixed-use. The property must be stabilized with consistent cash flow. Value-add, transitional, or development projects typically require bridge financing first.

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