Commercial Loan Rates

A list of commercial loan rates and indexes commonly used in this industry are below, for your reference.  Note that on each individual index, you can click on, to see a historical summary and chart, broken down by either week, month, year or over a three year period.  By taking a 3 year look at an index, you can get a better feel for its volatility.  This can be especially important if you are considering an adjustable rate loan and or a 1 to 3 year fixed program. 

   
Commercial loan rates consist of 1. an index and 2. the margin that the funding bank puts on "top".  For example. say you were quoted a  2% margin (or 200 basis points) over the 10 Year Treasury.  You would simply add the margin (2%) and the 10 Year Treasuries rate to figure out what your actual or Effective Interest Rate would be.  The margins are where banks make their spread.  It is a complicated process for the bank to figure out what they want to charge.  They have to essentially predict the future, taking into account their desired profit, default risk and future volatility of the index that the bank has (on its money), while at the same time still being competitive in order to win deals.

Commercial Loan Rates  

The most commonly used index behind commercial loan rates, for owner occupied properties, continues to be PRIME, LIBOR, SWAPS and the Treasury Indexes. Margins on top of these indexes typically range from .8% - 2.5%, though for special use and or difficult transactions the margins can be as high as 4% or more. 

Commonly used indexes for investment properties are the Treasuries, LIBOR, and the FHLB seem to becoming more popular.  Margins for investment properties also range widely based on loan amount, strength of tenants, market characteristics, historical cash flow, loan to value and debt coverage ratio's.  Margin between .8% - 2.25% are the most common. 

If possible it is best to receive your rate quote in writing and in the form of an index plus margin fashion, rather than just showing the Effective Rate.  Sometimes lenders will simply quote the rate and leave out the margin and index which weakens the borrowers position.  For example, should the underlying index's rate drop during the processing and underwriting of the loan it will be difficult for the borrower to create an argument as to why they should have a reduction in rate - simply because they do not know what the index being used is. Further, rate locks are not that common in the commercial mortgage industry. 

Trying to get a commercial mortgage? Fill out our mini commercial loan application to receive your customized commercial loan rate.

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Commercial Loan Rates