Commercial Loan Interest Rates: What to Expect in 2025

Current Commercial Real Estate Loan Rates

Commercial loan rates vary significantly based on loan type, property type, borrower strength, and market conditions. Here's what to expect in today's market. Use our commercial mortgage calculator to estimate payments based on current rates.

Rate Ranges by Loan Type

Rates as of January 2025. Actual rates depend on deal specifics.

Factors That Affect Your Rate

1. Loan-to-Value (LTV)

Lower LTV = lower rate. Lenders charge more when they take on more risk.

Rate Impact:

• 65% LTV: Best rates
• 70-75% LTV: +25-50 bps
• 75-80% LTV: +50-100 bps

2. Debt Service Coverage Ratio (DSCR)

Higher DSCR means the property has more cushion to cover payments. Calculate your property's DSCR with our free DSCR calculator.

Rate Impact:

• 1.40x+ DSCR: Best rates
• 1.25x-1.40x: Standard rates
• 1.15x-1.25x: +25-75 bps
• Below 1.15x: Limited options, higher rates (consider DSCR-specific loan programs)

3. Property Type

Risk profiles vary by asset class:

Lower Rates:

• Multifamily (especially agency-eligible)
• Industrial/warehouse
• Self-storage

Higher Rates:

• Retail (especially non-anchored)
• Office (especially suburban)
• Hotel/hospitality
• Special use properties

4. Location/Market

Primary markets command better rates than secondary or tertiary markets.

5. Loan Term

Longer terms typically mean slightly higher rates due to interest rate risk.

6. Prepayment Structure

More flexible prepayment = higher rate:

• Yield maintenance/defeasance: Lowest rates
• Step-down prepayment: Moderate rates
• No prepayment penalty: Highest rates

7. Borrower Strength

Strong financials, experience, and credit improve terms:

• Net worth exceeding loan amount
• 680+ credit score
• Track record with similar properties
• Strong liquidity position

Fixed vs. Floating Rates

Fixed-Rate Loans

• Pros: Payment certainty, protection from rising rates
• Cons: Higher initial rate, expensive to prepay
• Best for: Long-term holds, risk-averse borrowers

Floating-Rate Loans

• Pros: Lower initial rate, prepayment flexibility
• Cons: Payment uncertainty, rate cap costs
• Best for: Value-add, shorter holds, rate declining environment

How to Get the Best Rate

1. Shop Multiple Lenders

Don't accept the first quote. Work with a broker who can present your deal to multiple lenders simultaneously.

2. Strengthen Your Application

• Maximize DSCR by documenting all income
• Bring more equity if possible
• Address any property issues before applying

3. Time Your Rate Lock

• Lock when you're confident in closing timeline
• Understand lock extension costs
• Consider float-down options

4. Negotiate Points and Fees

Rate isn't everything. Compare total cost including:

• Origination fees
• Exit fees
• Legal costs
• Third-party reports

5. Consider the Full Picture

A slightly higher rate with flexible prepayment might be better than a low rate with yield maintenance if you plan to sell or refinance.

Rate Forecast

While we can't predict rates with certainty, consider:

• Fed policy direction
• Treasury yield movements
• Lender competition levels
• Economic conditions

Work with your lending team to structure deals that make sense regardless of rate movements.

Get Your Personalized Rate Quote

Every deal is unique. Contact us for a customized rate quote based on your specific property and situation.

Related Resources:

• Commercial Loan Requirements Guide
• Down Payment Requirements by Loan Type
• Bridge Loan Calculator