The Advantages of Using CMBS Conduit Loans

If you are looking to make a large purchase of commercial real estate, such as a restaurant building, strip mall or apartment complex, then you should consider pursuing a CMBS conduit loan. This type of loan is a mix between a traditional loan and a security with many advantages that make it a desirable loan for both banks and business owners. Some of the advantages of conduit loans include that it is more of an investment rather than a loan and it has consistent interest rates.

Investment, Not a Loan

The reason that these loans are considered a mix of a traditional loan and a security is that while it is applied for like a traditional loan, once it has been approved it becomes a security. A security is funded by investors who are paid by the mortgage payments. Since this type of loan is more of an investment, it can be a bit more difficult to have it approved. However, the issuers of the loan will evaluate the risk of the purchase. Your history of real estate investments can also play a factor in the decision. If you have a positive history of investing in real estate, the likelihood of your loan being approved is higher. Investors like consistent success, so if you have been able to demonstrate that in your past purchases, a CMBS loan is likely a good fit for you.

Consistent Interest Rates

Another advantage of using CMBS conduit loans is that they have low interest rates. The reason the interest rates are so low is that the minimum lending amount is typically around $2 million. With such a large amount of money being borrowed, the low interest rate is a very positive advantage. In addition, the interest rate being low, the rate will also stay fixed. Traditional loans tend to have fluctuating interest rates that change without any warning. This can cause problems when you are working on a tight budget. With a low, fixed interest rate, conduit loans have a consistent payment amount which can help you budget as a business owner.

Making a large purchase of commercial real estate is a huge investment. It is important to save money anywhere that you can. Using CMBS conduit loans instead of a traditional loan is one way cut back on unnecessary expenses. The low interest rate is a huge benefit, but having the support of other investors can help propel your project forward as well.


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