Commercial Refinance Loans in Chicago: Rate & Cash-Out Options (2025)

Chicago commercial property owners face a refinancing environment shaped by forces that are both national and distinctly local. The nationwide maturity wall is pushing over $936 billion in commercial mortgages to their due dates in 2026, and Chicago sits at the intersection of several acute pressure points. Loop office vacancy has climbed to an all-time high of 28.2%, CMBS loans originated during the 2015-2017 investment boom are maturing into a market where valuations have cratered, and Cook County's triennial reassessment cycle is driving property tax appeals that directly affect net operating income. Meanwhile, the expiration of nine TIF districts in 2025 and 13 more in 2026 is reshaping the tax landscape for commercial properties across the city.

This guide covers the full spectrum of refinance strategies for Chicago commercial property owners: rate-and-term refinancing, cash-out programs, CMBS defeasance, maturity extensions, and loan restructuring. For a broader overview of national programs, visit our commercial refinance loans page.

Why Is the 2025-2026 Maturity Wall Hitting Chicago So Hard?

The 2025-2026 maturity wall represents the largest concentration of commercial mortgage maturities in U.S. history. Nearly $1 trillion in loans matured in 2025, and another $936 billion is scheduled for 2026. Nationally, over $100 billion of those maturities sit in CMBS alone, and more than half of maturing CMBS loans are expected to default at maturity. The CMBS delinquency rate on office properties has climbed to 17.4%, up from 8.6% at year-end 2023.

Chicago faces an outsized share of this pressure. Moody's has identified Chicago alongside Los Angeles and Washington, D.C. as markets with particular office distress concerns. Loans originated in 2015-2017, when the Loop and River North were attracting significant institutional capital and tech-sector expansion, are now reaching their 10-year maturity dates. Borrowers who locked in rates between 3.0% and 4.0% now face a refinancing market where rates start at 5.18% and can exceed 7.5% depending on property type and leverage.

The impact on debt service is severe. An owner with a $12 million interest-only loan originated at 3.5% paid $420,000 annually in interest. Refinancing that same balance at 6.5% pushes the annual cost to $780,000, an 86% increase in debt service that directly compresses cash flow and threatens debt service coverage ratios.

Among office CMBS loans that matured before 2026 and still carry outstanding balances nationwide, 83.7% show delinquencies and 92.7% are in special servicing. Chicago's office CMBS exposure is concentrated in the Loop, along the Wacker Drive corridor, and in the West Loop. Sterling Bay's experience at 311 West Monroe Street illustrates the challenge: the fully leased office tower's $82.5 million mortgage saw annual debt service balloon to over $6 million, exceeding the building's $4.3 million in net cash flow, forcing a potential sale.

What Are Current Commercial Refinance Rates in Chicago?

As of early 2026, Chicago commercial mortgage rates start as low as 5.18%, though actual pricing depends on property type, LTV, borrower strength, and loan structure. The 10-year Treasury yield near 4.15% and the 5-year Treasury at 3.70% form the benchmark for most permanent commercial loans.

Here is how rates currently break down by loan type for Chicago properties:

• Agency (Fannie Mae/Freddie Mac): 5.25% to 5.85% for qualifying multifamily properties with 5-10 year terms, up to 80% LTV
• CMBS: 5.50% to 6.75% for stabilized commercial properties at 60-75% LTV with 5-10 year terms
• Bank/Credit Union: 5.50% to 7.00% for relationship borrowers, typically 5-year terms with 25-year amortization
• Life Insurance Companies: 5.20% to 5.90% for low-leverage (under 60% LTV) Class A assets in prime Loop and River North locations
• Debt Funds/Private Lenders: 7.50% to 12.00% for transitional, value-add, or higher-leverage refinancing
• HUD/FHA 223(f): 5.64% to 5.94% for multifamily refinance with up to 35-year fully amortizing terms
• SBA 504: 5.50% to 6.50% for owner-occupied commercial properties with up to 90% LTV

Estimate your monthly payments using our commercial mortgage calculator to run scenarios across different rate levels and loan terms.

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

Rate-and-term refinancing replaces your existing loan with a new one to secure a lower interest rate, extend the loan term, or convert from a floating rate to a fixed rate. The new loan amount roughly matches the outstanding balance. This strategy works best when rates have declined since origination or when a borrower needs to transition from a maturing bridge loan into permanent financing.

Cash-out refinancing allows you to borrow more than your current loan balance, extracting built-up equity as liquid capital. In Chicago, cash-out programs typically allow up to 75% LTV on most commercial property types. Agency multifamily programs can reach 75-80% LTV, and SBA 504 loans allow up to 20% of the appraised value for cash-out on eligible owner-occupied properties.

Cash-out refinancing is particularly strategic for Chicago owners who need capital for property improvements, portfolio expansion, or to fund costs associated with Cook County property tax appeals. Rather than selling an asset and triggering transfer taxes at every level (state, county, and city), a cash-out refinance extracts equity without any transfer tax because refinancing is not a sale.

Chicago owners sitting on equity in multifamily and industrial properties are increasingly using cash-out proceeds to acquire distressed office or retail assets at discounted prices, repositioning their portfolios while retaining their best-performing buildings. Use our DSCR calculator to check whether your property's income supports the higher loan amount in a cash-out scenario.

How Are Cook County Property Tax Appeals Driving Refinance Decisions?

Cook County's property tax system is among the most complex and consequential in the country for commercial real estate owners. The county follows a triennial reassessment cycle, and falling commercial property values, especially in the Loop and along the Magnificent Mile, have created a cascading effect on tax burdens across the entire county.

The Cook County Assessor's Office and the Board of Review have both acknowledged that declining commercial property values are the root cause of recent residential tax spikes. When commercial assessed values decline, the tax burden shifts to residential properties, creating political pressure to maintain commercial assessments even when market evidence supports reductions. This dynamic makes appeals both more necessary and more contentious for commercial owners.

For refinancing purposes, a successful property tax appeal directly improves your property's net operating income by reducing one of the largest fixed expenses. Here is the practical impact: a $500,000 reduction in assessed value on a commercial property in Chicago can reduce annual property taxes by $30,000 to $45,000, depending on the applicable tax rate and equalization factor. That improvement flows directly to NOI, which in turn strengthens your debt service coverage ratio and can qualify you for better loan terms or a higher loan amount.

The Board of Review reopened its 2025 property tax appeals window in late 2025, with filing deadlines varying by township. Commercial and industrial (Class 5) properties can file appeals online, and owners with documented evidence of value decline (comparable sales, income approach analysis, or vacancy data) stand a strong chance of securing reductions.

Practical steps for Chicago borrowers connecting tax appeals to refinancing:

• File your appeal before applying for refinancing. A pending or successful appeal can be factored into your pro forma NOI
• Gather market evidence. Recent comparable sales, income capitalization analysis, and vacancy reports from the Loop or your submarket strengthen your case
• Engage a property tax attorney. Cook County appeals are adversarial, and experienced counsel significantly improves outcomes
• Time your refinance application. If your appeal is likely to be decided within 3-6 months, consider waiting for the result before locking in your loan terms

How Is the Loop Office Vacancy Crisis Affecting Refinancing?

Chicago's downtown office market is experiencing vacancy levels that fundamentally alter the refinancing landscape. The share of available office space in the central business district ended 2025 at an all-time high of 28.2%, according to CBRE data. Class B buildings in the central Loop hit 30.5% vacancy, while Class A buildings fared somewhat better at 21.7%. Net absorption was deeply negative, with more companies vacating than leasing office space throughout much of 2025.

For office property owners seeking to refinance, these vacancy rates create a cascading set of challenges. Lenders underwrite based on in-place income and market rent assumptions. When the market shows 28% vacancy and negative absorption, underwriters apply higher vacancy and credit loss reserves, compress effective rental rate assumptions, and cap LTV ratios at 50-60% for all but the strongest assets.

Recent CMBS appraisals show office property values nationwide have dropped 55.8% since issuance, and Chicago's Loop is one of the hardest-hit markets. A building that appraised at $40 million at loan origination in 2016 might now appraise at $18-22 million, creating a massive equity gap that makes standard refinancing impossible without fresh capital.

What options exist for Chicago office owners facing this reality?

• Bridge financing through a bridge loan can provide 12-36 months of runway to stabilize occupancy before seeking permanent financing
• Preferred equity or mezzanine debt can fill the gap between a reduced first mortgage and the outstanding loan balance
• Office-to-residential conversion is gaining traction in the Loop, with several buildings already approved or under conversion, and lenders are increasingly willing to finance these transitions
• Maturity extensions from existing lenders remain the most common resolution, with extension fees typically running 0.25% to 1.00% of the outstanding balance

For properties with strong DSCR ratios, the refinancing picture is more favorable. Well-leased Class A office with creditworthy tenants and long remaining lease terms can still attract competitive permanent financing.

How Does CMBS Defeasance and Prepayment Work for Chicago Properties?

CMBS loans present unique refinancing challenges because the loans are securitized and sold to bondholders. Borrowers cannot simply pay off the loan early without satisfying prepayment provisions built into the trust documents. The two primary mechanisms are defeasance and yield maintenance.

Defeasance requires the borrower to purchase a portfolio of U.S. Treasury securities that replicate the remaining scheduled payments on the CMBS loan. The Treasuries replace the real estate as collateral, freeing the property for a new loan. In the current higher-rate environment, defeasance costs have moderated because higher Treasury yields mean fewer dollars are needed to purchase the replacement securities.

Yield maintenance requires a lump-sum payment equal to the present value of the interest rate differential between the original loan coupon and the prevailing Treasury rate for the remaining term. When current market rates exceed the original coupon, yield maintenance penalties can drop to near zero, creating a favorable window for borrowers holding older, low-rate CMBS loans.

For Chicago owners with CMBS loans maturing in 2025-2026, the situation is polarized. Nationally, KBRA data shows nearly 90% of CMBS loans with 2025 maturity dates (by count) paid off successfully, and the payoff rate by balance improved to 74.3% from 66.6% in 2024. However, office properties tell a different story entirely. Among office CMBS loans that matured before 2026 and still carry outstanding balances, 83.7% show delinquencies.

Chicago's CMBS exposure is concentrated in the Loop, West Loop, and River North. Multifamily, industrial, and well-positioned retail assets are refinancing successfully. Office buildings with high vacancy, short remaining lease terms, or deferred maintenance are ending up in special servicing. The special servicer has authority to modify loan terms, including extensions, rate reductions, and even principal write-downs when modification produces a better outcome for bondholders than foreclosure.

For a deeper understanding of bridge financing options that can provide interim capital while you resolve CMBS prepayment, read our commercial bridge loan guide.

How Do Illinois Transfer Taxes Factor Into the Refinance vs. Sale Decision?

Illinois imposes multiple layers of real estate transfer taxes that make refinancing significantly more cost-effective than selling for many Chicago commercial property owners. Unlike states with a single transfer tax, Chicago transactions face three separate levies:

• Illinois state transfer tax: $1.00 per $1,000 of sale price (0.10%)
• Cook County transfer tax: $0.50 per $1,000 of sale price (0.05%)
• City of Chicago transfer tax: $5.25 per $500 of sale price (1.05%), split between buyer ($3.75) and seller ($1.50)

The combined effective transfer tax rate in Chicago is approximately 1.20% of the sale price. On a $15 million commercial property, that translates to roughly $180,000 in transfer taxes alone, before accounting for brokerage commissions, legal fees, and other transaction costs.

Refinancing avoids all of these transfer taxes entirely because no sale occurs. The borrower retains ownership, extracts equity through a new mortgage, and pays only standard closing costs (typically 1.5% to 3.0% of the loan amount). For owners who need liquidity but want to retain their properties, cash-out refinancing is almost always the more tax-efficient path.

There is an additional Illinois-specific consideration: the state's mortgage recording tax. Illinois counties charge a modest fee for recording the mortgage document, but this is nominal compared to the transfer taxes saved by avoiding a sale. Cook County recording fees for mortgages are based on document length and are typically under $1,000.

Looking to compare your refinance options for a Chicago property? Contact our team for a no-obligation analysis of your current loan, potential rate savings, and cash-out capacity.

How Are TIF District Expirations Affecting Chicago Property Values and Refinancing?

Chicago's Tax Increment Financing (TIF) districts are approaching a critical inflection point. Nine TIF districts expired in 2025, and 13 more will expire at the end of 2026. When a TIF district expires, the equalized assessed value that had been frozen for 23 years returns to the general tax rolls, fundamentally changing the tax calculus for properties within those boundaries.

The impact on refinancing depends on your property's position relative to expiring TIF districts:

Properties inside expiring TIF districts may see assessed values jump as the frozen EAV is recalculated. This can increase property taxes, which reduces NOI and compresses DSCR. However, the removal of TIF restrictions also opens the door for certain development incentives and zoning flexibility that were previously unavailable.

Properties outside expiring TIF districts may benefit from a broader tax base. When TIF-captured increment returns to the general levy, the total taxable base increases, which can modestly reduce the tax rate applied to properties outside the TIF. The Civic Federation projects that expiring TIFs will generate over $100 million in new revenue between 2026 and 2030, with the city planning a $1.25 billion housing and economic development initiative funded partly by these expirations.

For refinancing strategy, the key question is timing. If your property sits inside a TIF district expiring in 2026, you may want to refinance before the expiration so that your current (lower) property tax basis is reflected in the underwriting. Alternatively, if you expect the broader tax base to reduce your effective rate, waiting until after expiration could produce a more favorable NOI picture.

What Loan Restructuring and Extension Options Exist for Chicago Borrowers?

Not every maturing loan requires a full refinance. Loan restructuring and maturity extensions offer alternatives for borrowers who need more time or face unfavorable market conditions.

Maturity extensions allow the borrower to push the loan due date forward by 1-3 years in exchange for a fee, partial paydown, or rate adjustment. Many Chicago bank lenders have been granting extensions rather than forcing distressed outcomes, particularly on office and retail properties. Extension fees typically run 0.25% to 1.00% of the outstanding balance.

Loan modifications can adjust the interest rate, amortization schedule, or covenants on an existing loan. A lender might agree to reduce the rate or extend an interest-only period if the alternative is a default that forces the property into costly special servicing.

A/B note splits restructure a single loan into a senior "A" note at the original terms and a subordinate "B" note that may carry different terms, including potential forgiveness tied to property performance targets.

Chicago's banking community plays a significant role in commercial real estate lending, with regional and community banks holding substantial portfolios of local CRE loans. These relationship lenders are often more willing to negotiate modifications and extensions than CMBS servicers or institutional lenders. If your loan is held by a local bank, your first conversation should be with your relationship manager about restructuring options well before maturity.

Understanding DSCR loan requirements can help you assess whether your property qualifies for a standard refinance or whether restructuring is the more realistic path.

What Refinance Programs Work Best for Different Chicago Property Types?

The ideal refinancing program depends on property type, condition, location within the Chicago metro, and borrower objectives. Here is how different Chicago asset classes typically match to loan programs:

Multifamily (5+ units): Agency loans through Fannie Mae and Freddie Mac offer the most competitive rates and terms. Chicago's strong rental demand across neighborhoods from Lincoln Park to Bronzeville makes multifamily the easiest asset class to refinance. HUD/FHA 223(f) provides 35-year terms at the lowest rates but involves a 6-12 month timeline.

Office (Class A): Well-leased Class A properties in the West Loop, along Wacker Drive, and in River North can still attract competitive permanent financing at 60-70% LTV. Tenancy quality and remaining lease term are the primary underwriting factors.

Office (Class B/C): The most challenged segment. LTVs capped at 50-60%, rates 150-250 basis points above multifamily, and many lenders refusing to quote entirely. Bridge financing or restructuring is often the only viable path.

Industrial/Warehouse: Chicago's industrial market, particularly in the I-55 corridor, O'Hare submarket, and south suburbs, commands favorable financing terms. Low vacancy, strong logistics demand, and proximity to intermodal facilities attract competitive offers from all lender types.

Retail: Grocery-anchored centers and essential-service retail along high-traffic corridors like North Michigan Avenue (lower floors), State Street, and suburban arterials finance relatively well. Single-tenant and specialty retail face more scrutiny.

Mixed-Use: Common across Chicago's urban corridors in neighborhoods like Wicker Park, Logan Square, and Pilsen. Financed based on dominant use; if residential income exceeds 50-60% of total revenue, agency programs may be available.

How Should Chicago Borrowers Prepare for a Commercial Refinance?

Successful refinancing requires preparation that starts 12-18 months before maturity. Here is a practical timeline for Chicago commercial property owners:

18 months before maturity: Order a preliminary property valuation and review your current loan documents for prepayment provisions. Begin assembling updated financials, including trailing-12-month operating statements, rent rolls, and capital expenditure history. Start the Cook County property tax appeal process if current assessments exceed market reality.

12 months before maturity: Engage a commercial mortgage broker or begin direct lender outreach. For properties with strong DSCR ratios, this lead time allows you to shop multiple lenders and secure optimal terms.

6-9 months before maturity: Lock your rate, complete the application, and begin the appraisal and environmental review process. Chicago properties typically require Phase I environmental assessments, and buildings near former industrial sites along the Chicago River or in the south and west sides may require Phase II testing.

3 months before maturity: Finalize legal review, complete title work, and coordinate closing.

Chicago-specific closing costs to budget for:

• Title insurance: 0.25% to 0.50% of loan amount
• Appraisal and environmental: $5,000 to $20,000 depending on property size and complexity
• Legal fees: $15,000 to $35,000 for borrower's counsel
• Lender origination fee: 0.50% to 1.50% of loan amount
• Phase II environmental (if needed): $10,000 to $30,000 for former industrial sites
• Insurance reserves: 3-12 months of premiums escrowed at closing
• Cook County recording fees: Under $1,000 for standard mortgage documents

Budget 1.5% to 3.0% of the total loan amount for closing costs on a standard Chicago commercial refinance.

Ready to refinance your Chicago commercial property? Contact our team for a no-obligation quote tailored to your property type and situation.

What Are the Most Common Mistakes in Chicago Commercial Refinancing?

Borrowers in the current market frequently make avoidable errors that cost them money or delay their refinance. Watch out for these common pitfalls:

1. Ignoring property tax appeal opportunities. Cook County reassessments create windows to reduce your tax burden, which directly improves NOI and your ability to qualify for better loan terms. Filing appeals should be part of every refinancing strategy.

2. Not accounting for TIF district expirations. Properties inside expiring TIF districts may face higher taxes that erode the NOI you presented to lenders. Model the post-TIF tax scenario in your pro forma.

3. Waiting too long to start. Beginning the refinance process 3 months before maturity limits your options and eliminates negotiating leverage. Start at 12-18 months.

4. Not shopping multiple lenders. Rate quotes on the same Chicago property can vary by 75-150 basis points across lenders. Get 3-5 quotes minimum.

5. Underestimating environmental risk. Chicago's industrial history means Phase I and Phase II environmental assessments can uncover issues that delay closing by months. Order assessments early, especially for properties along the Chicago River, in Pilsen, or near former manufacturing sites.

6. Overlooking the sale vs. refinance tax analysis. With Illinois, Cook County, and Chicago all imposing separate transfer taxes, the combined 1.20% rate makes selling more expensive than many owners realize. Always model the refinance alternative before listing a property for sale.

For more information about commercial lending options in Chicago, visit our Chicago commercial loans page.

Frequently Asked Questions

What is the minimum DSCR required for a commercial refinance in Chicago?

Most lenders require a minimum debt service coverage ratio (DSCR) of 1.20x to 1.25x for stabilized commercial properties in Chicago. Agency multifamily lenders may accept 1.15x to 1.20x for strong properties in high-demand rental neighborhoods like Lincoln Park or the West Loop. Office and retail properties face stricter requirements, often 1.30x to 1.50x, reflecting higher perceived risk given current vacancy rates. You can check your property's DSCR using our DSCR calculator.

How does a Cook County property tax appeal affect my refinance application?

A successful property tax appeal reduces your annual tax expense, which increases net operating income and improves your DSCR. This can qualify you for better rates, higher LTV, or both. If your appeal is pending at the time of refinance application, provide the lender with documentation of the appeal and estimated reduction. Many lenders will underwrite to the expected post-appeal tax figure if the evidence supporting the reduction is strong. The Cook County Board of Review processes appeals on a rolling basis tied to the triennial reassessment schedule.

What are the total transfer tax costs if I sell a commercial property in Chicago instead of refinancing?

Chicago commercial property sales trigger three separate transfer taxes: the Illinois state tax ($1.00 per $1,000, or 0.10%), the Cook County tax ($0.50 per $1,000, or 0.05%), and the City of Chicago tax ($5.25 per $500, or 1.05%). The combined effective rate is approximately 1.20% of the sale price. On a $20 million property, total transfer taxes are roughly $240,000. Refinancing avoids all of these taxes because no sale occurs, making it the more cost-efficient path for owners who need liquidity but want to retain ownership.

Can I refinance a Loop office building with high vacancy?

Yes, but options are limited and pricing will reflect the risk. Most traditional lenders cap LTV at 50-60% for high-vacancy Loop office properties, and rates are typically 150-250 basis points above what multifamily or industrial assets receive. Bridge loans from private lenders can close quickly and provide 12-36 months of runway to improve occupancy. Some borrowers are also exploring office-to-residential conversion financing for properties where the physical layout supports conversion.

How are expiring TIF districts affecting commercial refinancing in Chicago?

Nine TIF districts expired in 2025 and 13 more expire at the end of 2026. Properties inside expiring TIF districts may face increased assessed values and higher property taxes as the frozen equalized assessed value returns to the general tax rolls. This reduces NOI and can affect loan qualification. Properties outside expiring TIFs may benefit modestly from a broader tax base that could reduce the overall tax rate. Timing your refinance relative to TIF expiration is an important strategic consideration.

How long does a commercial refinance take in Chicago?

Timelines vary by loan type. Bank loans typically close in 45-60 days. CMBS loans require 60-90 days. Agency loans (Fannie Mae/Freddie Mac) close in 45-75 days. HUD/FHA 223(f) loans take 6-12 months. Bridge loans from private lenders can close in 2-4 weeks for urgent situations. Properties requiring Phase II environmental assessments may need an additional 30-60 days. Contact us to discuss your timeline and the best program for your situation.