Refinancing a commercial property can unlock significant savings, free up capital, and position your portfolio for long-term growth. Commercial refinancing replaces your existing commercial mortgage with a new loan, typically to secure better terms, lower your interest rate, or access built-up equity. With over $875 billion in commercial real estate loans maturing in 2026 alone, according to the Mortgage Bankers Association, understanding your refinancing options has never been more important.

Whether you own a multifamily complex, retail center, office building, or industrial warehouse, this guide walks through everything you need to know about commercial refinancing, from qualifying requirements to closing costs and timelines.

What Is Commercial Refinancing and How Does It Work?

Commercial refinancing is the process of replacing an existing commercial real estate loan with a new one, typically to achieve more favorable terms. The new loan pays off the remaining balance on the original mortgage, and the borrower begins making payments under the updated terms.

The mechanics are similar to residential refinancing, but commercial loans involve more complex underwriting. Lenders evaluate the property's income-generating potential, the borrower's financial strength, and broader market conditions before approving a new loan. Commercial refinancing generally falls into two categories: rate-and-term refinancing (adjusting the interest rate or loan duration) and cash-out refinancing (borrowing more than the current balance to access equity). For a deeper look at permanent financing options, visit our permanent loans page.

When Should You Consider Refinancing a Commercial Property?

Timing is everything when it comes to commercial refinancing. The best time to refinance is when market conditions, property performance, and your financial situation align to produce meaningful savings or strategic advantages. Here are the most common scenarios:

Interest rates have dropped. If current market rates are significantly lower than your existing rate, refinancing can reduce your monthly debt service and total interest paid over the loan term. Even a 0.5% reduction on a $2 million loan can save over $10,000 per year.

Your loan is approaching maturity. With the massive CRE maturity wall, many borrowers face balloon payments on loans originated at much lower rates. The average rate on loans maturing in 2026 is roughly 4.59%, while new commercial mortgage rates start around 5.18% to 6.5% depending on loan type and property quality. Planning ahead gives you leverage in negotiations.

Property value has increased. If your property has appreciated substantially, you may qualify for better LTV ratios and lower rates, or you could pursue a cash-out refinance to fund new acquisitions or improvements.

You need to access equity. Cash-out refinancing allows you to tap into property equity without selling. Investors commonly use these funds for renovations, acquiring additional properties, or consolidating higher-interest debt.

Your current loan terms are unfavorable. If you have an adjustable-rate loan and want to lock in a fixed rate, or if your current loan carries prepayment penalties that are about to expire, refinancing can improve your position.

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

Rate-and-term refinancing focuses on improving your loan's interest rate, repayment period, or both, while cash-out refinancing lets you borrow against your property's equity and receive funds at closing. Understanding the distinction is critical because each option comes with different requirements, costs, and risk profiles.

Rate-and-Term Refinancing

This is the most straightforward type of commercial refinance. Your new loan replaces the old one at a lower rate or with a different term length. The loan amount stays roughly the same. Borrowers typically choose this option to lower monthly payments, switch from a variable rate to a fixed rate, shorten the loan term, or avoid a balloon payment at maturity.

Cash-Out Refinancing

With a cash-out refinance, you take on a larger loan than your current balance and receive the excess as cash. This strategy works well when your property has appreciated or when you have paid down a significant portion of the principal. Common uses include funding renovations, acquiring additional properties, covering business expansion costs, or consolidating higher-interest debts.

Cash-out refinances typically come with slightly higher interest rates and lower maximum LTV ratios because the lender takes on more risk. You can explore our refinance programs for specific rate details.

What Are the Requirements for Commercial Refinancing?

Commercial refinance requirements vary by lender and loan type, but most lenders evaluate the same core criteria. To qualify for a commercial refinance, you generally need a minimum DSCR of 1.20x to 1.25x, an LTV ratio of 65% to 80%, and a credit score of at least 660 to 680.

Debt Service Coverage Ratio (DSCR)

The DSCR measures whether your property generates enough income to cover its debt obligations. Most lenders require a minimum DSCR of 1.20x to 1.25x for standard commercial refinancing. Higher-risk properties like office and retail may need a DSCR of 1.30x or higher. Use our DSCR calculator to evaluate your property's ratio before applying.

Loan-to-Value Ratio (LTV)

LTV compares the loan amount to the property's appraised value. Conventional commercial refinances typically cap LTV at 75% to 80% for rate-and-term deals and 65% to 75% for cash-out. SBA 504 refinancing allows LTV up to 90%, making it one of the most generous options available.

Credit Score

Most mainstream lenders require a minimum credit score of 680. Borrowers with scores above 700 and strong DSCR numbers generally receive the most competitive rates and terms. Some alternative lenders will work with scores as low as 620, though expect higher rates.

Additional Requirements

• Property seasoning: Most lenders require you to have owned the property for at least 6 to 12 months
• Cash reserves: Lenders often require 6 to 12 months of debt service payments held in reserve
• Net worth: Many lenders want the borrower's net worth to equal or exceed the loan amount
• Property condition: The property must be in good condition and meet lender standards, often verified through an inspection

What Types of Commercial Refinance Loans Are Available?

Several loan products exist for commercial refinancing, each designed for different property types, borrower profiles, and strategic goals. The main commercial refinance loan types include conventional bank loans, CMBS/conduit loans, SBA 504 loans, DSCR loans, and bridge-to-permanent financing.

Conventional Bank Loans

Traditional bank financing offers competitive rates for well-qualified borrowers with strong credit and stabilized properties. Terms typically range from 5 to 10 years with 25 to 30 year amortization.

CMBS/Conduit Loans

CMBS loans are securitized and sold on the secondary market, resulting in competitive fixed rates. They are non-recourse and LTV typically maxes out at 75%, but they come with rigid terms and limited flexibility. Learn more about conduit loan options.

SBA 504 Loans

The SBA 504 program offers some of the best terms for qualifying small businesses. Recent rule changes effective November 2024 raised the maximum LTV to 90% for all refinance projects. The original debt must have been in place for at least 6 months, and 75% must have been used for commercial real estate or major equipment.

DSCR Loans

DSCR loans qualify borrowers based on property income rather than personal income, making them ideal for investors with complex tax returns. Minimum DSCR requirements typically start at 1.0x to 1.25x. Visit our DSCR program page for details.

Bridge-to-Permanent Refinancing

Borrowers who used short-term bridge financing often refinance into permanent loans once the property is stabilized, moving from a higher-rate bridge loan to a lower-rate, fully amortizing permanent mortgage.

How Much Does It Cost to Refinance a Commercial Property?

Commercial refinancing typically costs between 2% and 5% of the loan amount in closing costs and fees. On a $1.5 million refinance, that translates to $30,000 to $75,000 in total costs. While these expenses can be significant, the long-term savings from a lower rate or better terms often justify the upfront investment.

Prepayment penalties on your existing loan deserve special attention. Many commercial loans include yield maintenance, defeasance, or step-down prepayment provisions that can add tens of thousands of dollars to your refinancing costs. Always calculate these penalties before committing to a refinance.

To estimate your potential monthly payments under a new loan, try our commercial mortgage calculator.

What Does the Commercial Refinancing Process Look Like?

The commercial refinancing process typically takes 30 to 90 days from application to closing, depending on property complexity, loan type, and lender efficiency. Here is a step-by-step overview of what to expect.

Step 1: Assess Your Situation (Week 1)

Before approaching lenders, gather your financial documents and evaluate whether refinancing makes sense. Calculate your current rate versus available market rates, estimate closing costs, and determine your break-even point.

Step 2: Shop Lenders and Get Quotes (Weeks 1-2)

Approach multiple lenders to compare terms, rates, and fees. Request formal quotes from at least three sources. Working with a commercial mortgage broker can streamline this process and give you access to a wider range of options.

Step 3: Submit Your Application (Week 2-3)

Once you select a lender, submit your complete application package including property financial statements, rent rolls, personal financial statements, entity documentation, current mortgage documents, and property insurance information.

Step 4: Underwriting and Due Diligence (Weeks 3-8)

The lender orders a property appraisal, environmental assessment, and title search. Underwriters analyze the property's income, market comparables, and your financial strength. This is the longest phase.

Step 5: Closing (Weeks 8-12)

Once the lender issues final approval, closing documents are prepared. At closing, the new loan funds, the old mortgage is paid off, and you begin payments under the new terms.

How Do You Determine If Refinancing Makes Financial Sense?

Refinancing makes financial sense when the total savings over the new loan term exceed the costs of refinancing, and when the break-even point occurs within a reasonable timeframe. Here is how to evaluate the decision.

Calculate Your Break-Even Point

Divide your total refinancing costs by your monthly savings. For example, if refinancing costs $40,000 and saves you $1,500 per month, your break-even point is approximately 27 months. If you plan to hold the property for significantly longer than that, refinancing is likely worthwhile.

Consider the Total Cost of the Loan

A lower rate does not always mean lower total costs. Extending your loan term can reduce monthly payments but increase total interest paid. Run the numbers for both scenarios using an amortization calculator.

Factor In Opportunity Cost

For cash-out refinances, consider whether the funds you extract can generate returns that exceed the cost of the additional debt. If you can use cash-out proceeds to acquire a property generating an 8% return while the refinance rate is 6%, the spread works in your favor.

Account for Market Timing

With the Federal Reserve holding rates steady at 3.50% to 3.75% as of January 2026, many experts expect modest rate movement in the near term. If you are on the fence, locking in current rates may protect you against potential increases.

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 reaching maturity between 2025 and 2028, creating both challenges and opportunities for borrowers seeking to refinance. According to the Mortgage Bankers Association, roughly $875 billion in commercial mortgages matured or will mature in 2026 alone, with some industry estimates putting the figure closer to $1.15 trillion.

This wave of maturities has several implications for borrowers:

Higher refinancing rates. Many loans were originated at historically low rates between 2019 and 2022. The average rate on maturing loans is approximately 4.59%, while current rates range from 5.18% to 7.5%. This gap means many borrowers will face higher debt service costs.

Tighter lending standards. Lenders have become more conservative, particularly for office and retail properties. Expect more scrutiny on cash flows, reserves, and borrower financial strength.

Opportunities for well-positioned borrowers. Properties with strong occupancy and solid DSCR ratios are still attracting competitive financing. KBRA reported that nearly 90% of conduit CMBS loans with 2025 maturity dates successfully refinanced.

Distressed opportunities. With total distressed CRE volume reaching $126.6 billion in Q3 2025, up 18% year over year, well-positioned borrowers may find acquisition opportunities among properties whose owners cannot secure new financing.

If you are facing a maturing loan and need guidance, contact our team to discuss your refinancing options.

What Are Common Mistakes to Avoid When Refinancing Commercial Property?

Refinancing a commercial property involves significant costs and long-term commitments. Avoiding these common mistakes can save you thousands of dollars and prevent costly delays in your refinancing process.

Ignoring prepayment penalties. Many borrowers underestimate the cost of exiting their current loan. Yield maintenance and defeasance provisions can add substantial costs that erode your refinancing savings. Always request a payoff quote from your current lender before committing.

Waiting too long to start. Commercial refinancing takes 30 to 90 days minimum. If your loan matures in 60 days, you may not have enough time to close a new loan, forcing you into an expensive extension or default. Start the process at least 6 to 12 months before maturity.

Not shopping multiple lenders. Rates and terms vary significantly between lenders. Getting quotes from at least three sources can reveal savings of 0.25% to 0.75% on your rate, which compounds into substantial savings over the loan term.

Overlooking total cost of ownership. A lower interest rate with higher fees and a longer term may cost more overall than a slightly higher rate with lower fees and a shorter term. Compare the total cost of each option, not just the monthly payment.

Neglecting property improvements. Your property's condition directly affects its appraised value and your refinancing terms. Investing in deferred maintenance before refinancing can improve your LTV ratio and unlock better terms.

For more about how corporate entities can approach the refinancing process, see our article on whether a corporation can apply for a loan.

How Do Current Market Conditions Affect Commercial Refinancing in 2026?

The 2026 commercial refinancing market is shaped by stabilizing interest rates, evolving lender standards, and sector-specific dynamics that create both headwinds and tailwinds for borrowers. Here is what you need to know about current conditions.

Interest Rate Environment

The Federal Reserve cut rates three times in late 2025 before pausing at 3.50% to 3.75% in January 2026. Commercial mortgage rates currently range from 5.18% to 7.5% depending on loan type and property quality. While below late 2023 peaks, they remain significantly higher than the sub-4% rates available during 2020 and 2021.

Sector Performance

Not all property types face the same refinancing landscape:

• Multifamily: Remains the strongest sector with high refinancing success rates and competitive terms
• Industrial: Continued demand for logistics and warehouse space supports strong valuations and favorable refinancing
• Retail: Neighborhood and grocery-anchored retail has recovered well, though mall and big-box properties still face challenges
• Office: The most challenged sector, with higher vacancy rates and lender reluctance making refinancing difficult for many owners

Lending Activity

CMBS issuance and bank lending have shown signs of recovery heading into 2026. Conduit loan refinancing is expected to increase, though volumes may remain below pre-pandemic norms.

Understanding how mortgage rules like the 3-7-3 rule affect your refinancing timeline can help you plan effectively. If you are considering refinancing a multifamily property specifically, our guide on what kind of loan works for multifamily covers the key options.

What Are the Most Common Questions About Commercial Refinancing?

How long does it take to refinance a commercial property?

The typical commercial refinance takes 30 to 90 days from application to closing. Simple rate-and-term refinances can close in as few as 30 days, while complex deals involving SBA loans or title complications may take 90 days or longer. Start the process 6 to 12 months before your loan matures for the best results.

Can I refinance a commercial property with bad credit?

Yes, though options will be more limited. Most conventional lenders require a minimum credit score of 680, but some alternative lenders work with scores as low as 580 to 620. DSCR loans, which qualify based on property income rather than personal credit, can be a viable option for borrowers with credit challenges.

What is the minimum equity needed to refinance a commercial property?

You need sufficient equity to meet LTV requirements. For conventional refinancing, you typically need at least 20% to 25% equity (75% to 80% LTV). Cash-out refinances require 25% to 35% equity (65% to 75% LTV). SBA 504 refinancing allows up to 90% LTV, requiring only 10% equity.

Are commercial refinance closing costs tax deductible?

Many commercial refinancing costs are tax deductible, though the timing varies. Points and origination fees are generally amortized over the life of the loan. Prepaid interest and property taxes may be deductible in the year paid. Consult a tax professional, as treatment depends on your entity structure.

Should I choose a fixed or variable rate when refinancing?

Fixed rates provide payment stability and protection against rate increases, making them ideal for long-term holds. Variable rates start lower but carry risk of future increases. In the current environment, many borrowers are choosing fixed-rate options. However, if you plan to sell within 3 to 5 years, a variable rate may make sense.

When is cash-out refinancing better than a second mortgage?

Cash-out refinancing is often preferable when your existing rate is close to current market rates. It consolidates debt into a single payment with lower blended rates. A second mortgage may be better if your first mortgage has an exceptionally low rate you want to preserve. Contact our lending team to discuss which option works best.

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Ready to explore your commercial refinancing options? Whether you are looking to lower your rate, access equity, or prepare for a maturing loan, our team at Clear House Lending can help you navigate the process. Get in touch today to discuss your specific situation and find the best refinancing solution for your property.

Frequently Asked Questions

What are current commercial refinancing rates?

Current rates for commercial refinancing typically range from 5.5% to 12%, depending on the loan type, property condition, borrower creditworthiness, and market conditions. Fixed-rate options generally start around 6.5% while variable-rate products may offer lower initial rates. Contact a lender for a personalized rate quote based on your specific deal.

What are the qualification requirements for commercial refinancing?

Qualification requirements typically include a minimum credit score of 650-680, a debt service coverage ratio (DSCR) of 1.20x to 1.25x, and a down payment of 15-25% of the property value. Lenders also evaluate the borrower's experience, property condition, and market fundamentals. Some programs like SBA loans have additional requirements including business operating history.

How much down payment is needed for commercial refinancing?

Down payment requirements for commercial refinancing typically range from 10% to 30% of the property purchase price or project cost. SBA loans may require as little as 10-15%, while conventional commercial mortgages usually need 20-25%. Bridge loans and construction financing often require 20-30% equity. Your down payment amount directly affects your interest rate and loan terms.

How long does it take to close on commercial refinancing?

The closing timeline for commercial refinancing varies by loan type. SBA loans typically take 60-90 days, conventional commercial mortgages close in 30-60 days, and bridge loans can close in as little as 10-21 days. The timeline depends on the complexity of the transaction, appraisal scheduling, and the completeness of your documentation package.

What DSCR do lenders require for commercial refinancing?

Most lenders require a minimum debt service coverage ratio (DSCR) of 1.20x to 1.25x for commercial refinancing. This means the property's net operating income must be at least 1.20 to 1.25 times the annual debt service. Some programs accept a DSCR as low as 1.0x for strong borrowers, while others may require 1.30x or higher for riskier assets.