What is a Commercial Mortgage Back Security Loan?
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CMBS loan is different from a traditional commercial loan. With a traditional commercial loan, the lender gets paid back over time. It is different with a conduit loan because the loan will be sold and packaged along with other commercial mortgage loans into a trust called a Real Estate Mortgage Investment Conduit (REMIC), turned into bonds, and sold on the secondary mortgage market to bond investors. This process is known as securitization, and it’s where these loans get their name.
Advantage of Commercial Mortgage Back Security Loan
How do the Rates Compare to Traditional Commercial Loan?
The main advantage of choosing a conduit loan is that these loans frequently offer a better interest rate than a conventional commercial loan for loan amounts above $1,000,000.00 dollars. CMBS loans can offer a fixed-rate option, which allows you to know the payments for the life of the loan.
Are Commercial Mortgage Back Security Loans NonRecourse?
Yes, CMBS loans are non-recourse loans. The buyer is not held personally liable for paying the loan. However, the loans do have a clause stating that if you deliberately cause harm to the property, your CMBS lender, or your investors, you will be held liable.
Are CMBS Loans Assumable?
Yes, these loans are assumable. If you choose to sell the property, a buyer can take over your CMBS financing and your interest rate. Lenders do charge a fee for the ability for the loan to be assumable.
What are the Disadvantage of Commercial Mortgage Back Security Loan?
Do CMBS Loans have Pre-Payment Penalties?
Yes, the prepayment penalties are devised for the lender to make the same profit that they would have made if the loan had been paid off within the agreed time frame. The CMBS loan has a defeasance prepayment penalty which does not allow the loan to be repaid or the borrower’s note to be canceled. Instead, the real estate is replaced by alternative collateral such as bonds, allowing the borrower to sell or refinance the property.
Wishing You the Best,
Karen Schimpf
| Â Commercial Capital LTD |
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