If you’re looking to finance an income-producing commercial property such as an apartment building, office building, or hotel, you might be considering what type of loan you should take. Perhaps you’ve reached out to several different financial services and couldn’t find anything that suits you. Depending on your situation, CMBS conduit loans might be your saving grace.

What Is a CMBS Loan?

“Commercial mortgage-backed security” is what CMBS stands for. This type of loan is securitized after being bundled with other loans to create a combined rate of return. When investors come along, the bundle’s shares are sold off. Depending on factors such as risk aversion, location, credit rating, and property type, investors might want to put money in several CMBS bonds.

The Benefits of CMBS Loans

For a minimal fee, CMBS conduit loans are fully assumable. You won’t have to deal with tedious tasks to get approved, which should make selling property much easier. You also won’t have to deal with prepayment penalties when you’re trying to get out of a loan.

If you’re a multifamily borrower, it might seem like a no-brainer to seek a multifamily loan from an agency such as Fannie Mae or Freddie Mac, or perhaps HUD. However, you might not have the most impressive net worth, credit, or real estate experience. CMBS loans can be a great alternative if this is your circumstance, as your property will be far more important to the lender than anything else. Also, CMBS loans are not serviced when they’re issued to you, and you won’t have to put in as much time and effort as you might with agencies or HUD.

Compared with bank loans, CMBS conduit loans involve a rather easy qualification process. Like Fannie Mae and Freddie Mac, banks prioritize commercial real estate experience, credit scores, and net worth. A bank loan’s rate is often far higher than a CMBS loan’s rate. For commercial property, there are many cases where a bank offers no more than a five-year loan. CMBS lenders usually offer far more than that.

What You Should Consider

If you’re looking for loans that have low-interest rates, are easy to get approved for, and are fully assumable, CMBS conduit loans might be worth considering. While these loans do come with risks and can be rather complicated, they won’t involve the same amount of hassle that major institutions might put you through. As long as you’re confident you can repay your loan payments, CMBS loans can help you recapitalize properties in ways that other loans can’t.