Commercial Loan Refinancing: Complete Guide

What Is Commercial Loan Refinancing and Why Does It Matter in 2026?

Commercial loan refinancing is the process of replacing an existing commercial real estate loan with a new loan that offers better terms, a lower interest rate, or access to built-up equity. For property owners navigating the current lending environment, commercial loan refinancing has become one of the most important financial strategies available. With over $957 billion in commercial real estate loans maturing in 2025 and 2026, understanding your refinancing options is not just helpful, it is essential.

Whether you own a multifamily apartment complex, a retail center, an office building, or an industrial warehouse, the right refinancing decision can save you tens of thousands of dollars per year in interest costs. This guide covers current rates, qualification requirements, the step-by-step process, and how to determine if refinancing makes financial sense for your property.

Use our commercial mortgage calculator to model different refinancing scenarios before reaching out to lenders.

The commercial real estate market in 2026 presents both challenges and opportunities for borrowers. Interest rates have stabilized compared to the rapid increases of 2022 and 2023, but many property owners are still carrying loans originated at significantly lower rates. The gap between existing loan rates and current market rates varies widely depending on when the original loan was originated and what type of financing was used.

For borrowers whose loans are approaching maturity, refinancing is not optional. It is a necessity. Understanding the current landscape ensures you are prepared to secure the best possible terms when the time comes.

What Are Current Commercial Refinancing Rates?

Current commercial refinancing rates range from approximately 5.50% to 8.50% for conventional options, depending on the loan type, property quality, and borrower profile. Life insurance company loans offer the lowest rates for premium stabilized assets, while bank portfolio loans sit at the higher end of the range for most borrowers.

Agency loans through Fannie Mae and Freddie Mac remain the most attractive option for multifamily property owners, with rates typically ranging from 5.75% to 7.00% for stabilized apartments with strong occupancy. CMBS conduit loans price slightly higher at 6.25% to 7.50% but offer non-recourse terms that many borrowers find appealing for office, retail, and industrial properties.

Bank portfolio loans range from 6.50% to 8.50% and offer the most flexibility in structuring. If you have a strong banking relationship, portfolio lenders may offer competitive pricing along with more accommodating underwriting standards. SBA 504 refinancing is available for owner-occupied properties at rates between 6.00% and 7.25%, with the added benefit of up to 90% loan-to-value. Learn more about SBA options in our guide to SBA loans for commercial real estate.

Rates are influenced by the 10-year Treasury yield, SOFR (Secured Overnight Financing Rate), lender spreads, and the overall risk profile of the transaction. Borrowers with strong DSCR ratios, lower leverage, and high-quality properties consistently receive the most competitive pricing.

What Is the Difference Between Rate and Term Refinance vs Cash-Out Refinance?

A rate and term refinance replaces your existing loan with a new one that has a lower interest rate or different amortization without increasing the total loan balance. A cash-out refinance allows you to borrow more than your current balance and receive the difference as cash for other investments or property improvements.

Rate and term refinancing works best when interest rates have dropped since your original loan was funded, when your current loan is approaching maturity and you need a new term, or when you want to move from a variable rate to a fixed rate for payment certainty. Most lenders will go up to 75% to 80% LTV, and closing costs tend to be lower because the transaction is simpler.

Cash-out refinancing lets you tap into property equity that has built up through appreciation, principal paydown, or both. If your property now appraises at $4 million with a $2 million remaining balance, you could potentially refinance up to $3 million (75% LTV) and receive approximately $1 million in cash. Proceeds are commonly used for acquiring additional properties, funding capital improvements, paying down higher-interest debt, or building operating reserves.

Use our DSCR calculator to determine if your property's income can support the higher debt service that comes with a cash-out refinance.

When Should You Refinance Your Commercial Loan?

You should consider refinancing when you can achieve a rate reduction of at least 75 basis points, when your loan is within 12 to 18 months of maturity, when your property has significantly appreciated in value, or when your current loan terms no longer align with your investment strategy.

The math behind refinancing decisions comes down to comparing your savings against your costs. If refinancing a $2.5 million loan saves you $30,000 per year in interest and your closing costs total $50,000, your breakeven point is approximately 20 months. If you plan to hold the property for at least three to five more years, that refinance makes strong financial sense.

Approaching maturity is the most common trigger for commercial loan refinancing. Unlike residential mortgages that often carry 30-year terms, commercial loans typically mature in 5, 7, or 10 years. Starting the process 6 to 12 months before maturity gives you sufficient time to shop multiple lenders and negotiate favorable terms.

Property value increases create refinancing opportunities even when rates have not dropped. Refinancing at a higher appraised value can reduce your LTV ratio and qualify you for better terms, or allow a cash-out to redeploy that equity into new acquisitions.

Changing market conditions may also prompt a refinance. If you are on a floating rate loan and expect rates to rise, locking in a fixed rate provides payment certainty.

What Are the Requirements to Refinance a Commercial Loan?

The primary requirements include a minimum DSCR of 1.20x to 1.30x, a maximum LTV of 65% to 80% depending on the loan type, a credit score of 660 or higher, and adequate borrower net worth and liquidity. Lenders evaluate both the property's performance and the borrower's financial strength when underwriting a refinance.

Debt Service Coverage Ratio (DSCR) is the single most important metric. A 1.25x DSCR means the property produces 25% more income than needed for loan payments. Most conventional lenders require 1.20x to 1.30x, while bridge loan lenders may accept 1.00x or even slightly below for value-add situations. Calculate your property's DSCR using our DSCR calculator.

Loan-to-Value (LTV) limits vary by loan type. Agency multifamily loans allow up to 80%, CMBS caps at 75%, bank loans range from 65% to 75%, and SBA 504 offers up to 90% for owner-occupied properties. Review our guide on commercial loan down payment requirements for detailed LTV information.

Credit score minimums start at 660, with 680 or higher needed for the best rates. Bridge and hard money lenders may work with scores as low as 620 at higher rates.

Net worth and liquidity requirements vary. Agency loans typically require net worth equal to or exceeding the loan amount with 10% post-closing liquidity. CMBS loans require net worth of at least 25% of the loan.

Property occupancy and seasoning requirements typically mean 85% to 90% occupancy sustained for at least 90 days, plus a potential 6 to 12 month seasoning period from acquisition.

What Does the Commercial Loan Refinancing Process Look Like Step by Step?

The commercial loan refinancing process typically takes 45 to 90 days from application to funding and follows six main stages: loan evaluation, documentation gathering, application submission, underwriting and appraisal, commitment negotiation, and closing.

Step 1: Evaluate your current loan. Review your interest rate, remaining balance, maturity date, and prepayment penalties to determine whether refinancing produces a net benefit after accounting for all costs.

Step 2: Gather financial documentation. Prepare trailing 12-month property operating statements, current rent roll, two to three years of tax returns, personal financial statements, and entity organizational documents.

Step 3: Submit applications to multiple lenders. Shopping to three to five lenders gives you leverage to negotiate better terms. Working with an experienced broker like Clear House Lending saves significant time, as brokers maintain relationships with dozens of lenders and can quickly identify the best match for your property profile.

Step 4: Underwriting and appraisal. The lender orders a third-party appraisal, reviews your financials in detail, and may request additional documentation. This phase takes two to four weeks and is where most delays occur.

Step 5: Receive and negotiate the commitment letter. Review every detail carefully, as some terms may differ from the initial term sheet. Negotiate any unfavorable provisions before signing.

Step 6: Close and fund. Title work, legal review, document preparation, and funding complete the process. Your existing loan is paid off from the new loan proceeds, and any cash-out funds are disbursed to you.

What Is the CRE Maturity Wall and How Does It Affect Refinancing?

The CRE maturity wall refers to the unprecedented volume of commercial real estate loans coming due between 2024 and 2027, with over $2.2 trillion requiring refinancing or payoff. This wave of maturities creates both urgency and competition among borrowers seeking to refinance, directly impacting available terms and lender capacity.

The challenge is that many of these loans were originated during 2019 through 2022 at rates between 3.00% and 4.50%. Borrowers now face refinancing at rates 200 to 400 basis points higher, which can dramatically reduce cash flow and push properties below minimum DSCR thresholds.

Property owners most at risk include those with office properties facing declining occupancy, borrowers who purchased at peak valuations with high leverage, and owners in markets where cap rate expansion has reduced values. For these borrowers, bridge loans or mezzanine financing may be necessary to bridge the gap.

The silver lining is that lenders are offering creative solutions. Loan extensions, modifications, and restructurings are more common now than in typical market cycles. If your loan is part of this maturity wave, contact a commercial lending specialist to review your options well before your maturity date.

How Much Does It Cost to Refinance a Commercial Loan?

Refinancing a commercial loan typically costs between 1% and 3% of the loan amount when accounting for all fees. On a $2 million refinance, expect total closing costs of $20,000 to $60,000 depending on the loan type and complexity.

Origination fees range from 0.50% to 2.00% of the loan amount. Appraisal costs run from $3,000 to $15,000. Legal and title fees range from $5,000 to $25,000. Environmental reports cost $2,000 to $8,000 for a Phase I assessment.

Prepayment penalties on your existing loan can be the largest cost of all. Step-down penalties might cost 1% to 5% of the balance, while yield maintenance or defeasance can cost significantly more. Always get a payoff quote that includes the exact prepayment penalty amount before committing to refinance.

The key is ensuring that projected savings from the new loan exceed total refinancing costs within a reasonable timeframe. If annual savings are $30,000 and costs are $45,000, your breakeven is 18 months. Most advisors recommend refinancing when you can recoup costs within two to three years.

What Prepayment Penalties Should You Watch For?

The most common prepayment structures in commercial lending are yield maintenance, defeasance, step-down penalties, lockout periods, and open periods. Understanding each type is critical because prepayment costs can make or break the financial case for refinancing.

Yield maintenance compensates the lender for lost interest income based on the difference between your loan rate and current Treasury yields. It can be the most expensive option when your loan rate is well above current market rates.

Defeasance is common in CMBS loans and requires purchasing Treasury securities that replicate remaining loan payments. Step-down penalties follow a declining schedule like 5-4-3-2-1, making them more predictable. Lockout periods prohibit prepayment entirely for a set period. Open periods allow penalty-free prepayment in the final three to six months of the loan term.

Many experienced investors plan their refinancing around prepayment penalty schedules, targeting the window when penalties are lowest or eliminated.

How Can You Maximize Your Savings When Refinancing?

You can maximize savings by shopping multiple lenders for competing term sheets, timing your refinance to minimize prepayment penalties, improving your property's NOI before applying, and working with an experienced commercial mortgage broker.

Shop aggressively. The difference between the best and worst rate quote on the same property can be 100 to 200 basis points. Submit your loan package to at least three to five lenders across different categories.

Improve your NOI before applying. Since DSCR is the primary underwriting metric, boosting net operating income through rent increases, expense reductions, or improved occupancy can qualify you for better rates.

Time your refinance strategically. Align your closing with step-down penalty decreases or open prepayment windows to minimize exit costs on your current loan.

Lock your rate early. In a volatile rate environment, securing a rate lock at application rather than at closing protects you from market movements. Most lenders offer 30 to 60 day rate locks.

Ready to explore your refinancing options? Contact Clear House Lending for a no-obligation analysis of your current loan and a comparison of available refinancing programs.

Should You Refinance Into a Fixed or Floating Rate?

Fixed rates provide payment certainty and are generally preferred for long-term holds of five years or more. Floating rates offer lower initial pricing and flexibility for shorter hold periods or properties you plan to sell or reposition within two to three years.

Fixed rate refinancing locks in your interest rate for the full loan term. In 2026, fixed commercial rates range from approximately 5.50% to 8.50% depending on the loan type and term. They are ideal when you plan to hold long-term and want predictable cash flow for budgeting.

Floating rate refinancing ties your rate to SOFR plus a spread and typically runs 50 to 150 basis points below comparable fixed rates at origination. Floating rates suit investors planning to sell or refinance again within two to three years who are comfortable with payment variability.

A bridge loan is a common floating rate option for borrowers stabilizing a property before refinancing into permanent financing. Learn more in our guide on what is a commercial bridge loan.

Frequently Asked Questions About Commercial Loan Refinancing?

How long does it take to refinance a commercial loan? The typical timeline is 45 to 90 days from application to closing. Bank portfolio loans can sometimes close in 30 to 45 days. Having organized documentation ready at application can shorten the timeline by two to four weeks.

Can I refinance a commercial loan with bad credit? Yes, though options are more limited and rates will be higher. Bridge and private lenders may work with scores as low as 620 if the property has strong cash flow and low leverage.

Is there a seasoning requirement to refinance? Some programs require 6 to 12 months from acquisition. Agency loans have specific seasoning requirements, while bank portfolio lenders may be more flexible.

Can I refinance a commercial loan that is underwater? Traditional refinancing will be difficult since lenders will not fund a loan exceeding the property's value. Options include loan modification, bringing additional collateral, or finding mezzanine or preferred equity partners.

What DSCR do I need to refinance? Most lenders require 1.20x to 1.30x. Bridge lenders may accept 1.00x for value-add properties. Use our DSCR calculator to check your property.

Should I use a broker or go direct to a lender? Brokers offer access to dozens of lenders and can negotiate on your behalf. However, an existing banking relationship can sometimes yield the best pricing through relationship discounts.

Can I refinance into an SBA loan? Yes, the SBA 504 program allows refinancing for properties that are at least 51% owner-occupied with businesses operating at least two years. It offers up to 90% LTV and competitive fixed rates.

What happens if I cannot refinance before my loan matures? Options include requesting a loan extension from your current lender, selling the property, bringing in additional equity, or securing a bridge loan to buy additional time.

What Are Your Next Steps for Refinancing?

Your next step depends on where you are in the process. If your loan matures within the next 12 to 18 months, the time to start exploring options is now. If you are early in your loan term but see an opportunity to improve your rate or access equity, running the numbers to determine your breakeven point is a smart first move.

Here is a simple action plan:

1. Review your current loan terms. Pull out your loan documents and note your current rate, balance, maturity date, and prepayment penalty schedule.
2. Calculate your property's current DSCR. Use our DSCR calculator to determine if your property meets minimum refinancing thresholds.
3. Estimate your property's current value. Compare recent sales of similar properties in your market to get a rough value estimate and potential LTV.
4. Model refinancing scenarios. Use our commercial mortgage calculator to compare different rate and term combinations.
5. Get a professional assessment. Contact Clear House Lending for a complimentary review of your current loan and a personalized comparison of available refinancing programs.

Whether you are looking at a straightforward rate and term refinance, a cash-out refinance to fund your next acquisition, or need a bridge loan to stabilize a property before securing permanent financing, our team can help you navigate the options and find the best fit for your investment goals.

Sources: Federal Reserve Economic Data (FRED), Mortgage Bankers Association (MBA) Commercial/Multifamily Lending Report, Trepp CRE Loan Performance Data, National Association of Realtors Commercial Real Estate Outlook, CBRE U.S. Capital Markets Report 2025-2026.