Commercial mortgage rates are not published the way residential rates are, because there is no standardised secondary market setting a national price. Your rate is assembled from a benchmark index plus a spread the lender sets for your specific asset, leverage, and sponsor profile.
How commercial pricing is built
Commercial rate = index + spread. The index is a market benchmark neither you nor the lender controls. The spread is what the lender adds for your specific deal — and that is the part your property and profile actually move.
Common indexes include Treasury yields at matching maturities, SOFR, and the prime rate depending on lender and structure. When commentators say commercial rates rose, they usually mean the index moved. Your spread may not have.
This is why a headline commercial rate means very little. Two borrowers on the same day, with the same index, can be a full point apart on spread — because one is buying a leased industrial building at moderate leverage and the other is buying a half-empty retail centre at maximum leverage.
The six drivers of your spread
| Driver | How it moves your rate |
|---|---|
| Asset type | Multifamily and industrial price tightest. Retail, office, and hospitality wider. Special-purpose widest. |
| Leverage (LTV) | Higher leverage prices higher, with meaningful steps between tiers. |
| Debt service coverage | Stronger coverage earns a tighter spread. Thin coverage widens it or caps leverage. |
| Lease and tenant quality | Long leases with credit tenants price better than short leases or rollover-heavy rent rolls. |
| Sponsor experience and financials | Track record, liquidity, and net worth all affect the spread — more than on residential lending. |
| Term and recourse | Shorter terms and full recourse price tighter; longer terms and non-recourse price wider. |
Pricing by asset type
Relative pricing across asset classes is more stable than absolute pricing, which makes it more useful for planning:
- Multifamily — generally the tightest commercial pricing, because it is the most liquid asset class with the deepest lender pool.
- Industrial and warehouse — close behind multifamily in most markets, with strong lender appetite.
- Mixed use — prices between residential and commercial depending on the split; a higher residential proportion prices better.
- Retail — wider, and highly sensitive to tenant mix and lease terms. Grocery-anchored prices better than unanchored strip.
- Office — wider still, with occupancy and lease rollover scrutinised closely.
- Hospitality and special-purpose — widest, with a narrower lender pool. Self storage sits somewhere in between.
Structure choices that move the rate
- Fixed vs floating. Floating starts lower and carries index risk; fixed costs more for certainty. Match to your hold.
- Term length. A 5-year term prices tighter than a 10-year, because the lender's rate exposure is shorter.
- Recourse. Accepting a personal guarantee typically tightens the spread meaningfully.
- Prepayment protection. Accepting a longer lockout, yield maintenance, or defeasance lowers the rate. Buying flexibility raises it.
- Interest-only period. An initial IO period improves cash flow and coverage but usually carries a pricing adjustment.
- Leverage. Reducing LTV by a tier is often the single most effective way to improve pricing.
Costs beyond the rate
Commercial closings carry costs residential borrowers do not expect, and they belong in your comparison:
- Origination points charged upfront as a percentage of the loan
- Third-party reports — appraisal, environmental, property condition, survey. These are substantial on commercial deals and are usually borrower-paid regardless of outcome.
- Legal fees — both yours and, frequently, the lender's
- Title, survey, and recording, which vary considerably by state
- Application or good-faith deposit, typically funding the third-party reports
Comparing quotes properly
Compare all-in cost over your actual hold period, on the same scenario, with the same recourse and prepayment structure. A quarter-point lower rate paired with defeasance is not cheaper if you intend to sell in year four.
And compare like for like on leverage. One lender quoting 65% LTV and another quoting 75% are not offering the same product — the cheaper-looking one may simply be the more conservative offer.
Program parameters vary by lender and property type and change with market conditions. Figures here describe what is typical across the commercial and business-purpose market — they are not a quote. Send us the scenario for real numbers.
