WHAT IS PERMANENT FINANCING?
The Final Step in Your CRE Capital Stack
Permanent financing (also called a takeout loan) replaces short-term debt — construction loans, bridge loans, hard money, or mini-perm facilities — with long-term mortgage debt. It’s the exit strategy that every short-term lender asks about during underwriting, and the step that converts your project into a stabilized, cash-flowing asset.
Takeout timing is critical. Construction and bridge lenders underwrite your exit, so they want a credible path to permanent financing before they approve the initial loan. Having your takeout strategy lined up early gives you negotiating leverage and prevents costly extensions or forced sales.
Construction Takeout
Replace your construction loan once the project reaches stabilized occupancy. Transition from interest-only draws to fully amortizing permanent debt.
Bridge Loan Exit
Exit 12–36 month bridge facilities once your value-add business plan is complete and the property achieves target NOI and occupancy.
Hard Money Replacement
Replace 9–13% hard money rates with permanent debt at 6.25–8%. The monthly savings alone often justify the refinancing costs.
Fixed-Rate Stability
Lock in predictable payments for 5–30 years. Eliminate rate risk and create reliable cash flow projections for investors and lenders.
Multiple Lender Options
Permanent loans available through banks, CMBS, life insurance companies, agency (Fannie/Freddie for multifamily), and SBA programs.
Cash-Out Available
If the property has appreciated since acquisition or construction, permanent financing can include cash-out to recapitalize or fund the next deal.
PERMANENT LOAN OPTIONS
Compare Takeout Structures by Lender Type
The right permanent loan depends on your property type, hold period, and whether you need recourse or non-recourse terms.
| Bank / Portfolio | CMBS | Agency | Life company | |
|---|---|---|---|---|
| Property Types | All CRE types | All CRE types | Multifamily only | Stabilized, high-quality property |
| Rate Range | 6.5–8% | 7–8% | 6.25–7.25% | 6.5–7% |
| Max LTV | 75 – 80% | 65 – 75% | 75 – 80% | Lower leverage than CMBS or agency |
| Term | 5 – 10 years | 5 – 10 years | 5 – 30 years | Longer fixed terms available |
| Amortization | 20 – 25 years | 25 – 30 years | 30 years | Up to fully amortizing |
| Recourse | Full recourse | Non-recourse | Non-recourse | Usually non-recourse |
| Flexibility | High | Low | Medium | Medium (loan stays with the lender) |
| Best For | Relationship, smaller | $2M+ stabilized | Apartments 5+ units | Low leverage, long hold |
Typical ranges, updated September 2026. Your terms depend on the property, the borrower and the lender.
TAKEOUT READINESS CHECKLIST
When Is Your Property Ready for Permanent Financing?
Permanent lenders underwrite stabilized properties. Meeting these benchmarks before applying ensures a smooth transition from short-term to long-term debt.
90%+
Stabilized Occupancy
Most permanent lenders require 90%+ occupancy sustained for 3–6 months. Some accept 85% for strong properties in prime markets.
1.20x+
DSCR on Actual NOI
NOI must cover debt service at the permanent loan terms, not the construction loan terms. Run numbers on the takeout rate and amortization.
Completed
Construction / Renovation
All building work must be substantially complete with certificate of occupancy issued. Punch list items may be acceptable with holdback escrow.
3–6 months
Operating History
Lenders want to see actual rent rolls and operating statements from stabilized operations, not projections. The longer the track record, the better.
Current
Third-Party Reports
Appraisal, environmental (Phase I), property condition report, and survey must be current. Many can be updated from the construction loan origination.
6–12 months early
Start Planning
Begin permanent financing discussions 6–12 months before your construction or bridge loan matures. Late starts lead to costly extensions or forced sales.
TAKEOUT SIZING
Example: Will the Permanent Loan Pay Off Your Construction Loan?
A permanent lender sizes the loan on the property’s actual NOI at its rate and amortization — not the construction loan’s. Run the takeout before you need it.
Example: a new building with a $3,750,000 construction loan reaches $400,000 of stabilized NOI and appraises at $6,000,000. The permanent lender wants a 1.25x DSCR, 30-year amortization and no more than 75% LTV. Computed with our max loan calculator; rates are examples.
| Permanent rate 6.75% | Permanent rate 8.5% | |
|---|---|---|
| Largest permanent loan | $4,111,000 | $3,468,000 |
| Loan-to-value | 68.5% | 57.8% |
| What limits it | DSCR | DSCR |
| Versus the $3,750,000 construction loan | $361,000 left over | $282,000 short |
Same building, same NOI: at 6.75% the takeout repays the construction loan with cash to spare; at 8.5% the owner must bring $282,000 or wait for more NOI. That is why construction and bridge lenders ask for the exit math up front, and why it pays to check it again 6–12 months before maturity.
Typical ranges, updated September 2026. Your terms depend on the property, the borrower and the lender.
Free tools
Run the numbers
The same metrics a lender checks — free, instant, no signup. Each result links straight into an application.
- Commercial Mortgage Calculator Estimate your monthly CRE loan payment, total interest cost, and full amortization schedule. Compare loan structures before you apply.
- DSCR Calculator Calculate your Debt Service Coverage Ratio instantly. See if your property qualifies for CRE financing and which loan programs are available to you.
- Refinance Break-Even Calculator Find out exactly how many months until your refinancing savings cover the closing costs. Make a data-driven decision on whether to refinance your CRE loan.
FREQUENTLY ASKED QUESTIONS
Permanent Financing FAQ
What is the difference between permanent financing and a takeout loan?
They are the same thing. A takeout loan is permanent financing that specifically replaces (takes out) an existing short-term loan like a construction or bridge facility. Every takeout loan is a permanent loan, but not every permanent loan is a takeout.
How soon after construction completion can I get permanent financing?
Most permanent lenders want 3–6 months of stabilized operating history after construction completion. Some bank portfolio lenders may consider earlier conversion if the property has strong pre-leasing commitments. Plan your construction timeline accordingly.
How is a permanent loan sized?
On the property’s stabilized net operating income at the permanent lender’s rate and amortization: the loan is the lower of a loan-to-value cap and the largest loan whose payment the NOI covers at the lender’s minimum DSCR. In our example, $400,000 of NOI supports $4,111,000 at 6.75% but $3,468,000 at 8.5% (1.25x, 30 years).
What happens if my property isn’t stabilized when my bridge loan matures?
You’ll need to either negotiate a loan extension (typically 6–12 months with fees), find a new bridge lender to refinance the existing bridge, or in worst cases, sell the property. This is why planning permanent financing early is critical.
Can I cash out when converting to permanent financing?
Yes, if the stabilized property value supports it. Many borrowers use the permanent takeout to recover their equity investment from the construction or value-add phase. Cash-out proceeds can fund the next project or return capital to investors.
What are mini-perm loans?
A mini-perm is a 3–7 year intermediate loan that bridges the gap between construction and true permanent financing. It’s used when the property needs more time to stabilize or when the borrower wants to wait for better permanent market conditions.
How do I choose the right permanent lender type?
Bank/portfolio for flexibility and relationship pricing. CMBS for non-recourse and competitive fixed rates on $2M+ deals. Agency (Fannie/Freddie) for the best multifamily terms. Life companies for large, trophy assets. Our advisors compare all options for your specific deal.
Related on BestLoanUSA
Related financing
All loans →- Hard Money Takeout A hard money takeout refinance replaces a short-term hard money or bridge loan with a long-term loan once the property is renovated, leased or stabilized. Bank, SBA and DSCR lenders typically lend up to 75% of value at about 6.25–8.75%, compared with 9–13% for hard money. Permanent financingHard money
- CRE Refinancing A commercial real estate refinance replaces your existing mortgage with a new loan — to lower the rate, replace a maturing balloon, move from floating to fixed, or take cash out. To refinance, check your current loan’s maturity and prepayment penalty, get the property appraised, show that its net operating income covers the new payment at the lender’s minimum DSCR, compare term sheets and close — the new lender pays off the old loan, usually in 30–60 days. Bank, SBA 504, CMBS and DSCR lenders price refinances at about 6.25–8.75%. CMBSHard money
- Retail A retail property loan finances storefronts, strip centers, shopping centers and single-tenant net-lease buildings. Investors use bank, DSCR or CMBS loans, sized on the leases and tenant quality; a business that occupies its storefront can use SBA 504 with as little as 10% down. CMBSBridge loans
- What Is a CRE Loan? A commercial real estate loan is financing for income-producing or business-use property — offices, retail, industrial, multifamily (5+ units) — underwritten on the property’s cash flow and value as well as the borrower, not a home mortgage. CMBSConstruction loans
Guides & articles
All articles →- Bridge Loan vs Hard Money Loan: Cost, Terms and Which Fits Bridge loans and hard money loans are both short-term real estate debt, but differ in lender, cost, leverage and speed. Side-by-side terms and a worked example. Hard moneyBridge loans
- Bridge Loans for Real Estate Investors: When to Use Them When a bridge loan makes sense for a real estate investor, what it really costs in rate, points and fees, and how to plan the exit before you close. Bridge loansPermanent financing
- Multifamily Loans: How to Finance a 5+ Unit Apartment Building How financing changes at five units: multifamily loan types, how lenders underwrite an apartment building's income, and what they require. Bridge loansMultifamily
Glossary
All terms →More calculators
All calculators →- Debt Yield Calculator Calculate Debt Yield (NOI ÷ Loan Amount) — the metric CMBS and institutional lenders prioritize over DSCR and LTV. Find your maximum loan amount based on target debt yield. CMBSNOI
- Defeasance Calculator Estimate the total cost of defeasing your CMBS or conduit commercial loan. See the Treasury portfolio cost, transaction fees, and how it compares to yield maintenance. CMBS