Commercial real estate investors who want long-term stability and predictable payments eventually need to secure a permanent commercial loan. Whether you are acquiring a stabilized asset, completing a construction project, or transitioning from short-term bridge financing, permanent loans are the foundation of a strong real estate portfolio.
This guide covers everything you need to know about permanent commercial loans in 2026, including current rates, qualification requirements, loan types, and the best strategies for locking in favorable long-term terms.
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What Is a Permanent Loan in Commercial Real Estate?
A permanent loan is a long-term mortgage on a commercial property that replaces short-term financing or serves as the original acquisition loan for a stabilized asset. Unlike bridge loans or construction loans that are designed for transitional periods, permanent loans provide fixed or adjustable-rate financing over terms ranging from 5 to 30 years.
Permanent loans are sometimes called "takeout loans" because they "take out" or replace interim financing. For example, a developer who completes a ground-up construction project will typically transition to a permanent loan once the property reaches stabilized occupancy and cash flow targets.
The defining characteristics of a permanent commercial loan include:
- Long-term structure with fixed terms of 5 to 30 years
- Amortization schedules of 20 to 30 years that gradually reduce the principal balance
- Lower interest rates compared to bridge, construction, or mezzanine financing
- Predictable monthly payments that allow investors to plan cash flow with confidence
- Higher underwriting standards because lenders are committing capital for a longer period
Permanent financing is the goal for most commercial real estate investors. Short-term loans serve a purpose during acquisition, renovation, or lease-up, but they come with higher rates and shorter timelines. A permanent loan locks in stability and allows investors to build equity over time.
How Long Is a Permanent Commercial Loan?
Permanent commercial loan terms typically range from 5 to 30 years, depending on the lender type and loan program. However, there is an important distinction between the loan term and the amortization period that every borrower should understand.
The loan term is the length of time before the loan matures and the remaining balance becomes due. The amortization period is the schedule over which payments are calculated, as if the loan were being paid off over that longer timeline.
For example, a common structure is a 10-year term with a 25-year or 30-year amortization. The borrower makes monthly payments based on a 30-year payoff schedule, but the remaining principal balance comes due as a balloon payment after 10 years. At that point, most borrowers refinance into a new permanent loan rather than paying the balloon in cash.
Here is how terms break down by lender type:
- Bank loans: 5 to 10-year terms with 20 to 25-year amortization
- CMBS/Conduit loans: 5 to 10-year terms with 25 to 30-year amortization
- Life company loans: 10 to 30-year terms with 25 to 30-year amortization
- Agency loans (Fannie Mae/Freddie Mac): 5 to 30-year terms with 30-year amortization
- SBA 504 loans: 20 to 25-year fully amortizing terms
Life insurance company loans and agency loans offer the longest terms, which is one reason they are so popular among institutional investors and experienced operators. Shorter-term bank loans may work well for borrowers who plan to sell or refinance within a few years.
Use the Clearhouse commercial mortgage calculator to model different term and amortization combinations and see how they affect your monthly payments and total interest costs.
What Is the Difference Between a Bridge Loan and a Permanent Loan?
Bridge loans and permanent loans serve fundamentally different purposes in a commercial real estate investment strategy. Understanding when to use each one is critical for maximizing returns and minimizing financing costs.
A bridge loan is short-term financing, typically 6 to 36 months, designed to "bridge" a gap. Investors use bridge loans when a property is not yet stabilized, when speed of closing is essential, or when the property does not yet qualify for permanent financing. Bridge loans carry higher interest rates (typically 7.5% to 12% in the current market) and are usually interest-only.
A permanent loan is the long-term solution. Once a property is stabilized with sufficient occupancy and cash flow, the investor replaces the bridge loan with permanent financing at a lower rate and a longer term.
The bridge-to-permanent transition is one of the most common strategies in commercial real estate. Here is a typical timeline:
- Acquire the property using a bridge loan for speed and flexibility
- Execute the business plan by renovating, leasing up, or stabilizing operations
- Achieve target metrics including occupancy above 85-90% and DSCR above 1.25x
- Apply for permanent financing 3 to 6 months before the bridge loan matures
- Close the permanent loan and pay off the bridge balance
Some lenders offer bridge-to-permanent programs that combine both phases into a single loan, simplifying the process and reducing closing costs. Ask your Clearhouse Lending advisor about these options.
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What Are the Requirements for a Permanent Commercial Loan?
Permanent commercial loans have stricter qualification standards than bridge or construction loans because lenders are committing capital for a longer period. Here are the key requirements you should expect in 2026.
Debt Service Coverage Ratio (DSCR)
The DSCR measures whether the property generates enough income to cover its debt payments. Most permanent lenders require a minimum DSCR of 1.20x to 1.35x, depending on the property type and loan program. A DSCR of 1.25x means the property's net operating income is 25% higher than its annual debt service.
For lower-risk assets like well-located multifamily properties, lenders may accept a 1.20x DSCR. For riskier property types such as office or retail, expect requirements of 1.30x or higher.
Loan-to-Value Ratio (LTV)
Permanent loans typically cap at 65% to 80% LTV, meaning borrowers need at least 20% to 35% equity in the property. Life company loans tend to be more conservative at 55% to 65% LTV, while agency and CMBS loans may reach 75% to 80% LTV for strong assets.
Borrower Credit and Experience
Most permanent lenders require a minimum credit score of 660 to 680, though stronger scores (700+) unlock better rates and higher leverage. Lenders also evaluate the borrower's net worth (typically at least equal to the loan amount), liquidity (6 to 12 months of debt service reserves), and experience managing similar properties.
Property Stabilization
The property must be stabilized, meaning it has achieved a consistent occupancy rate (usually 85% or higher) and is generating predictable net operating income. Properties still in lease-up or undergoing major renovations do not qualify for permanent financing.
Documentation Requirements
Expect to provide personal financial statements, 2 to 3 years of tax returns, current rent rolls, operating statements (trailing 12 months), property appraisal, environmental reports (Phase I), and title and survey documents.
When Should You Transition to Permanent Financing?
Timing the transition from short-term to permanent financing is one of the most important decisions in a commercial real estate investment. Moving too early can result in unfavorable terms, while waiting too long risks bridge loan maturity and extension costs.
Here are the key indicators that your property is ready for permanent financing:
Occupancy has stabilized. Most permanent lenders want to see 85% to 95% occupancy sustained for at least 3 to 6 months. A single month of high occupancy is not enough, as lenders want to see a trend.
Net operating income supports the debt. Run the numbers using current NOI against projected permanent loan payments. If the DSCR exceeds 1.25x with comfortable margin, the property is likely ready.
Renovations and capital improvements are complete. Unfinished construction or deferred maintenance will hurt your appraisal value and make permanent lenders uneasy. Complete all planned improvements before applying.
Market conditions are favorable. With the 10-Year Treasury yield at approximately 4.27% as of February 2026 and permanent loan rates ranging from 4.80% to 7.5%, the current environment offers reasonable entry points for long-term fixed-rate financing. Rates have stabilized compared to the volatility of 2023 and 2024.
Your bridge loan is approaching maturity. Most bridge loans have initial terms of 12 to 24 months with optional extensions. Start the permanent loan application process at least 3 to 6 months before your bridge matures to avoid costly extensions or default scenarios.
For properties transitioning from construction loans, the timeline is similar. Once the certificate of occupancy is issued and tenants begin occupying the space, the clock starts on stabilization. Many construction lenders build in a 12 to 18-month lease-up period before requiring the takeout to permanent financing.
Talk to a Clearhouse advisor about your transition timeline
What Types of Permanent Commercial Loans Are Available?
The permanent loan market offers several distinct products, each with different rate structures, terms, and qualification criteria. Choosing the right one depends on your property type, loan size, investment timeline, and borrower profile.
Agency Loans (Fannie Mae and Freddie Mac)
Agency loans are available exclusively for multifamily properties (5+ units) and offer some of the most competitive rates in the market. As of February 2026, Freddie Mac multifamily rates start around 5.18%, with terms from 5 to 30 years and up to 80% LTV. The Federal Housing Finance Agency established lending caps of $88 billion each for Fannie Mae and Freddie Mac in 2026, ensuring strong liquidity for apartment investors.
Agency loans work best for stabilized multifamily properties with 5 or more units in markets with strong rental demand.
CMBS/Conduit Loans
CMBS loans are securitized commercial mortgages that offer high leverage (up to 75% LTV) and competitive fixed rates. They work well for larger stabilized properties across all commercial asset types, including office, retail, industrial, and hospitality. Minimum loan sizes typically start at $2 million.
The tradeoff is less flexibility. CMBS loans have strict prepayment penalties (defeasance or yield maintenance), and servicing is handled by a third-party special servicer rather than the originating lender. Read the complete CMBS guide for a deeper look at conduit loan structure.
Life Insurance Company Loans
Life companies offer the lowest rates and longest terms in permanent commercial financing, but they are also the most selective. These lenders focus on Class A properties in primary markets, with typical LTV caps of 55% to 65%. Minimum loan sizes are usually $2 million or more, and underwriting is thorough.
Life company loans are ideal for institutional-quality assets where the borrower has strong financials and does not need maximum leverage. Rates are typically 25 to 75 basis points lower than CMBS for comparable properties.
Bank Portfolio Loans
Local and regional banks offer permanent loans that they hold on their balance sheets (portfolio loans). These loans provide more flexibility in structuring, including adjustable rates, shorter terms, and negotiable prepayment provisions. Banks typically offer 5 to 10-year terms with 20 to 25-year amortization and LTV up to 70% to 75%.
Bank loans work well for smaller deals ($500K to $10M), borrowers who want a direct relationship with their lender, and situations that require customized terms.
SBA 504 Loans
For owner-occupied commercial properties, SBA 504 loans provide permanent financing with as little as 10% down, fixed rates, and terms up to 25 years. These loans are fully amortizing (no balloon payment), making them one of the most borrower-friendly permanent loan options available.
How Do Permanent Loan Rates Compare to Other Commercial Financing?
Permanent loan rates are consistently lower than short-term commercial financing options because lenders face less risk on stabilized properties with proven cash flow. Here is how rates compare across financing types as of February 2026.
The rate difference between a bridge loan and a permanent loan can be substantial. A borrower paying 9.5% on a $5 million bridge loan would pay approximately $475,000 per year in interest. Transitioning to a permanent loan at 5.75% reduces that annual interest cost to approximately $287,500, saving nearly $187,500 per year.
Several factors determine where your permanent loan rate falls within the range:
- Property type: Multifamily properties get the best rates, followed by industrial, retail, and office
- Leverage: Lower LTV ratios unlock lower rates, with the best pricing below 60% LTV
- DSCR: Higher debt service coverage gives lenders more confidence and results in better pricing
- Loan size: Larger loans ($5M+) typically receive better rate quotes
- Borrower strength: Strong net worth, liquidity, and experience reduce perceived risk
- Prepayment structure: Loans with longer lockout periods or yield maintenance may have lower base rates
The 10-Year Treasury yield, currently around 4.27%, serves as the benchmark for most fixed-rate permanent commercial loans. Spreads above the Treasury range from approximately 150 to 300 basis points depending on the lender type and risk profile. This means a typical permanent loan rate calculation looks like: 4.27% (Treasury) + 1.75% (spread) = 6.02% for a mid-market deal.
What Should You Know Before Applying for a Permanent Commercial Loan?
Before starting the application process, preparation is key. The underwriting process for permanent loans is more thorough than bridge or construction financing, and being well-prepared can shave weeks off your timeline.
Prepayment Penalties
Permanent loans come with prepayment provisions that can significantly impact your flexibility. The most common structures include:
- Yield maintenance: Compensates the lender for lost interest income if you pay off early, often the most expensive option
- Defeasance: Replaces your loan collateral with government securities, common in CMBS loans
- Step-down penalties: Start high (5% of the balance) and decrease annually (5-4-3-2-1 structure)
- Soft prepay or open periods: Some loans allow penalty-free prepayment in the final 3 to 6 months
Understanding prepayment terms before signing is critical, especially if you plan to sell or refinance within the loan term.
Closing Timeline
Permanent loans take longer to close than bridge financing. Expect 45 to 90 days for bank loans, 60 to 90 days for CMBS, and 60 to 120 days for life company loans. Agency loans typically close in 45 to 60 days. Plan your transition timeline accordingly.
Recourse vs. Non-Recourse
Many permanent loans are available on a non-recourse basis, meaning the lender can only look to the property (not the borrower's personal assets) in the event of default. CMBS and agency loans are typically non-recourse, while bank loans may require personal guarantees. Non-recourse loans usually require "bad boy" carve-outs for fraud, environmental issues, or voluntary bankruptcy.
What Are the Most Common Questions About Permanent Commercial Loans?
What is the minimum loan amount for a permanent commercial loan? Minimum loan sizes vary by lender type. Bank portfolio loans may start as low as $250,000 to $500,000. CMBS and life company loans typically require a minimum of $2 million. Agency loans for multifamily properties start at $750,000 for small balance programs.
Can I get a permanent loan on a mixed-use property? Yes, most permanent lenders finance mixed-use properties. If the property is majority residential (51%+ of square footage), it may qualify for agency financing with more favorable terms. Otherwise, bank, CMBS, or life company loans are available.
What credit score do I need for a permanent commercial loan? Most lenders require a minimum credit score of 660 to 680. However, borrowers with scores of 700 or higher will qualify for better rates and higher leverage. Some agency programs have minimum scores as low as 620 for strong properties.
How much equity do I need for a permanent commercial loan? Typical equity requirements range from 20% to 45% of the property value, depending on the lender type. Agency loans require as little as 20% equity, while life company loans typically require 35% to 45%.
Are permanent commercial loan rates fixed or variable? Both options are available. Most permanent loans feature fixed rates for the full term (5 to 30 years), but adjustable-rate options exist through banks and some CMBS programs. Fixed rates provide payment certainty, while adjustable rates may start lower but carry the risk of future increases.
What happens when a permanent loan matures? If the loan has a balloon payment at maturity (which most do, except SBA 504), the borrower must either pay off the remaining balance in full, refinance into a new permanent loan, or sell the property. Most investors refinance, which is why it is important to monitor your loan maturity date and begin planning 6 to 12 months in advance.
Can I convert a construction loan to a permanent loan? Yes, this is a standard process in commercial real estate development. Once construction is complete and the property reaches stabilized occupancy, borrowers transition to permanent financing. Some lenders offer construction-to-permanent loan programs that roll both phases into a single closing.
Get started with your permanent loan application today
What Is the Bottom Line on Permanent Commercial Loans?
Permanent commercial loans are the cornerstone of long-term real estate investment success. They provide the stability, predictability, and cost savings that allow investors to build wealth through commercial property ownership. Whether you are locking in your first permanent loan or refinancing a maturing note, understanding the available options and qualification requirements puts you in the strongest possible negotiating position.
With rates ranging from 4.80% to 7.5% across major loan programs in early 2026, and multiple lender types competing for quality deals, borrowers have meaningful choices. The key is matching the right loan product to your property type, investment timeline, and financial profile.
Clearhouse Lending works with agency, CMBS, life company, bank, and SBA lenders nationwide to help commercial real estate investors secure the best permanent financing available. Our team handles the entire process from application to closing, ensuring you get competitive terms with minimal hassle.