What Exactly Are CMBS Conduit Loans?
Commercial Mortgage Backed Security loans, also known as conduit loans, have been around for decades. Many commercial real estate developers are unfamiliar with these types of loans and are missing out on the opportunities they can offer. With a CMBS loan, commercial mortgages are pooled with others and then sold as a package for investors to use as collateral for the CMBS or conduit loan. This can be broken up into tranches in a secondary market to provide different levels of risks for investors and greater liquidity in the commercial mortgage market.
How To Use One
Conduit loans can be used in a variety of ways for commercial real estate including purchasing new property, upgrading an existing one or even fix and flip endeavors. When looking into the different types of financing available for your project, it is a good idea to compare things such as prepayment options, interest rates and much more.
Not many loans these days will come with a penalty for paying it off sooner than the term limit, but even fewer offer benefits and a potential rebate for borrowers when they do pay it off sooner. With the right CMBS loan terms, early repayment of your loan may entitle you to a piece of the pie after the term ends through defeasance. This is the process of allowing the borrower to purchase substitute collateral for the loan and has specific federal requirements. It is possible to get a prepayment penalty with this type of lending, however, so it is important to understand the terms before signing the paperwork.
Where To Get One
You can get a CMBS loan through various companies that you can find and research online. This allows you to see what kinds of loans are available, what the terms are and even how much you can borrow for your needs without leaving your office. Some of these companies will have representatives ready to answer questions and help you with the paperwork, and many will have informational resources available on their websites.
Conduit loans, or CMBS loans, can sound incredibly complicated when you are just starting the researching process of securing one. These loans can help you get the financing that you need for your commercial real estate project by bundling similar loans into a pool and selling them to investors to use as collateral. This can be a good way to grow your business or to even invest in the businesses of others.
