Why Are Colorado Springs Property Owners Refinancing in 2026?
Commercial refinancing has become one of the most critical financing activities in Colorado Springs' real estate market, driven by a combination of maturing loans, changing property values, and the need to optimize debt structures in a shifting rate environment. With approximately $1.2 trillion in commercial mortgages maturing nationally in 2025 and 2026, Colorado Springs property owners face decisions that will shape their investment returns for years to come.
The refinancing challenge is straightforward but consequential. Many Colorado Springs commercial properties were financed between 2020 and 2022 at rates of 3.5% to 5.0%. Those loans are now maturing into a market where rates range from 5.75% to 8.0% depending on property type and borrower profile. The average rate on expiring loans is around 4.59% for 2026 maturities, while new financing often exceeds 6.0%, creating a gap that affects cash flow, debt service coverage, and property valuations.
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Colorado Springs' commercial real estate fundamentals provide a supportive backdrop for refinancing activity. Industrial vacancy of approximately 5.4%, retail vacancy near 4.9%, and continued population growth driven by the defense and aerospace sector employing roughly 111,000 people create the income performance that lenders require for refinancing approval. The metro's defense economy, anchored by Fort Carson, Peterson Space Force Base, Schriever SFB, NORAD, and more than 200 defense companies, provides an economic stability that few secondary markets can match.
However, not all property types face equal refinancing conditions. Office properties with 11.6% vacancy and negative net absorption face the most challenging refinancing environment, while industrial and retail properties benefit from tight markets that support favorable terms. Understanding these dynamics helps Colorado Springs property owners develop refinancing strategies that match their property profiles.
For borrowers exploring commercial loans in Colorado Springs, refinancing represents an opportunity to optimize debt terms, access equity, and position properties for long-term success.
What Commercial Refinance Programs Are Available in Colorado Springs?
Colorado Springs property owners can access multiple refinancing programs, each designed for different property profiles, equity positions, and financial objectives. Selecting the right program can save tens of thousands of dollars annually in debt service.
Conventional Bank Refinance serves stabilized Colorado Springs properties with strong occupancy and income performance. Rates range from 6.25% to 7.75% with 5 to 10 year terms and up to 75% LTV. Local and regional banks with Colorado market knowledge offer the most competitive terms for borrowers with established banking relationships and strong financial profiles.
SBA 504 Refinance provides the most favorable terms for owner-occupied commercial properties. Colorado Springs business owners refinancing their own facilities can access fixed rates between 5.75% and 6.75% for 20 to 25 year terms with up to 90% LTV. The SBA 504 refinance program also allows cash-out for eligible business expenses, making it a powerful tool for defense contractors, medical practices, and professional service firms.
CMBS/Conduit Refinance offers non-recourse financing for larger Colorado Springs commercial properties. Rates range from 5.88% to 7.49% with 5 to 10 year terms and up to 75% LTV. CMBS refinancing works well for stabilized multi-tenant properties, anchored retail centers, and industrial assets with strong lease profiles.
DSCR Refinance allows investment property owners to refinance based solely on the property's income without personal income verification. Rates range from 7.0% to 9.0% with 30-year terms and up to 75% LTV. Both rate-and-term and cash-out refinances are available, making this program attractive for Colorado Springs portfolio investors.
Bridge Refinance serves properties that do not currently qualify for permanent financing due to occupancy issues, needed renovations, or income stabilization requirements. Rates range from 8.5% to 12.0% with 12 to 36 month terms. Bridge refinancing can replace a maturing permanent loan while the borrower addresses the property's deficiencies.
Permanent Loan Refinance from life insurance companies and agency lenders offers the most favorable long-term rates for qualifying properties. Rates range from 5.50% to 7.00% with 10 to 30 year terms. These programs require strong property fundamentals and borrower credentials but provide the lowest all-in cost of capital.
When Does Refinancing Make Financial Sense in Colorado Springs?
Not every Colorado Springs commercial property should refinance, and the decision depends on multiple factors that borrowers must evaluate carefully before proceeding.
Rate improvement is the most common motivation. If your current rate exceeds available market rates by 50 basis points or more, refinancing may produce sufficient savings to justify the transaction costs. However, Colorado Springs property owners whose existing loans carry rates below 5.0% from the 2020 to 2022 vintage may find that refinancing at today's rates of 6.0% to 8.0% would actually increase debt service. In these cases, holding the existing loan to maturity (if possible) preserves the favorable rate.
Term extension motivates refinancing when a loan is approaching maturity. Many Colorado Springs properties carry 5 to 7 year loans originated in 2019 to 2021 that are maturing now. Refinancing into a new 5 to 10 year term provides stability and avoids the risk of a forced sale or default at maturity.
Cash-out refinancing allows Colorado Springs property owners to access equity that has accumulated through property appreciation, debt paydown, and income growth. This equity can fund property improvements, portfolio expansion, or business operations. Cash-out refinancing is typically available at 65% to 75% LTV, depending on the property type and loan program.
Recourse reduction is another refinancing motivation. Borrowers with full-recourse bank loans may refinance into non-recourse CMBS or agency financing, removing the personal guarantee and limiting the borrower's exposure to the property's performance rather than their entire net worth.
Loan structure optimization through refinancing can include switching from variable to fixed rates, extending amortization to reduce monthly payments, or consolidating multiple loans into a single facility. These structural improvements can significantly enhance cash flow and reduce management complexity.
Which Colorado Springs Property Types Face the Most Urgent Refinancing Needs?
The urgency of refinancing varies by property type, reflecting the different performance dynamics across Colorado Springs' commercial sectors.
Office Properties face the most challenging refinancing environment. With 11.6% vacancy and negative net absorption, many Colorado Springs office buildings have experienced declining income since their current loans were originated. Lower income combined with higher refinancing rates may produce DSCR below lender minimums, requiring additional equity, rate buydowns, or bridge financing to execute the refinance. Class A office in Briargate with defense tenants faces significantly better refinancing prospects than Class B/C space in secondary locations.
Multifamily Properties benefit from strong absorption and growing rental demand across the northeast corridors. Colorado Springs apartment properties generally refinance successfully, though the gap between maturing rates (around 4.0% to 5.0%) and current rates (5.5% to 7.0%) reduces cash flow. Multifamily cap rates of 4.7% to 5.4% support property values that enable refinancing at reasonable leverage levels.
Retail Properties with vacancy near 4.9% refinance most easily in the current environment. NNN retail with credit tenants receives the most favorable treatment, while multi-tenant properties with shorter leases face more standard underwriting. The sector's strong fundamentals give Colorado Springs retail owners leverage in negotiating refinancing terms.
Industrial Properties at 5.4% vacancy refinance favorably, particularly those with defense sector tenants. The limited construction pipeline and steady demand from aerospace and logistics companies support the income stability that refinancing lenders require.
How Do You Qualify for a Commercial Refinance in Colorado Springs?
Qualifying for commercial refinancing in Colorado Springs requires meeting lender standards across property performance, borrower credentials, and market conditions.
DSCR requirements for Colorado Springs refinancing typically range from 1.20x to 1.35x depending on property type. Industrial and retail properties often meet these thresholds comfortably, while office properties may require additional equity or structural adjustments. Borrowers can use a DSCR calculator to evaluate their property's qualification before applying.
Loan-to-value requirements for refinancing range from 65% to 80% depending on the program. The current appraisal determines the maximum loan amount, and property values in Colorado Springs have been stable to modestly growing for industrial and retail while softening for office. Borrowers should request a broker opinion of value before ordering a formal appraisal to ensure the expected value supports the desired loan amount.
Occupancy requirements for permanent refinancing start at 85% to 90% for most lenders. Properties below these thresholds may qualify for bridge refinancing at higher rates until occupancy improves. Colorado Springs' tight industrial (5.4%) and retail (4.9%) vacancy means most properties in these sectors meet occupancy standards.
Borrower credit and financial requirements include a minimum credit score of 680 for conventional programs (660 for SBA), net worth equal to the loan amount, and liquidity of 6 to 18 months of debt service. DSCR refinance programs eliminate personal income verification, qualifying based solely on property performance.
What Are Current Refinancing Rates in Colorado Springs?
Refinancing rates in Colorado Springs reflect property type, borrower profile, and loan program selection. Understanding the rate landscape helps borrowers set expectations and negotiate effectively.
The rate gap between existing and available refinancing rates represents the central challenge for many Colorado Springs property owners. A property financed at 4.5% in 2021 that refinances at 6.75% in 2026 sees a 50% increase in interest cost, significantly impacting cash flow and returns. However, the alternative, a loan default at maturity, is far more costly.
Borrowers with strong property performance and credentials can often negotiate better rates than listed ranges. Colorado Springs properties with defense sector tenants, long-term leases, and strong DSCR command the tightest pricing within each program category. Shopping rates across multiple lenders consistently produces savings of 25 to 75 basis points.
Rate locks are available during the underwriting process, typically for 30 to 90 days with an optional extension. In a volatile rate environment, locking the rate at application provides certainty that the refinancing economics will hold through closing.
Using a commercial mortgage calculator helps Colorado Springs borrowers compare refinancing scenarios across different rate, term, and amortization combinations to identify the optimal structure.
What Is Cash-Out Refinancing and How Does It Work in Colorado Springs?
Cash-out refinancing allows Colorado Springs property owners to access accumulated equity by refinancing for more than the existing loan balance and receiving the difference in cash.
The mechanics are straightforward. If a Colorado Springs industrial property is worth $2 million with an existing loan balance of $1 million, the owner has $1 million in equity. A cash-out refinance at 70% LTV would produce a new loan of $1.4 million, paying off the existing $1 million balance and providing $400,000 in cash (minus closing costs).
Cash-out proceeds can fund property improvements that increase income and value, acquisition of additional Colorado Springs properties, business operations and working capital (particularly relevant for owner-occupied properties), debt consolidation across multiple properties, and partnership buyouts.
Cash-out refinancing is typically limited to 65% to 75% LTV, 5% to 10% below the maximum LTV available for rate-and-term refinances. The lower leverage limit protects the lender by maintaining an equity cushion after the cash-out. Some programs impose a 6 to 12 month seasoning requirement, meaning the borrower must have owned the property for at least 6 to 12 months before a cash-out refinance is available.
SBA 504 cash-out refinancing is available for owner-occupied properties, with eligible uses including business debt consolidation, equipment purchases, and facility improvements. This program offers the highest leverage (up to 85% for cash-out) and lowest rates for qualifying Colorado Springs business owners.
How Does Prepayment Affect Refinancing Decisions in Colorado Springs?
Prepayment penalties on existing loans represent one of the most significant factors in Colorado Springs refinancing decisions. Understanding the prepayment structure of your current loan is essential before pursuing a refinance.
Yield maintenance provisions calculate the cost of prepayment based on the present value of remaining interest payments, discounted at the Treasury rate for the remaining term. In the current rate environment, yield maintenance penalties on loans originated at lower rates can be substantial, sometimes exceeding 10% of the outstanding balance. This cost must be weighed against the benefits of refinancing.
Defeasance provisions require the borrower to purchase Treasury securities that replicate the remaining loan payments, effectively replacing the property as collateral. Defeasance is common in CMBS loans and can cost 5% to 15% of the loan balance depending on the rate differential and remaining term.
Step-down prepayment penalties decrease over time, typically following a schedule like 5-4-3-2-1 (5% in year one, declining to 1% in year five). These penalties are more common in bank loans and provide a clear, predictable prepayment cost.
No-penalty windows near loan maturity (typically the final 90 to 180 days) allow borrowers to refinance without prepayment cost. Timing your refinancing to coincide with these windows can save significant expense.
Borrowers should request a payoff statement from their current lender early in the refinancing process to determine the exact prepayment cost and evaluate whether the refinancing economics justify the expense.
What Common Mistakes Should Colorado Springs Borrowers Avoid When Refinancing?
Refinancing mistakes can cost Colorado Springs property owners tens of thousands of dollars or result in failed transactions. Avoiding these common pitfalls improves outcomes.
Starting too late is the most damaging mistake. Refinancing a commercial loan requires 60 to 120 days from application to closing, and lender backlogs can extend timelines further. Beginning the refinancing process at least 6 months before loan maturity provides adequate time to shop rates, complete underwriting, and close without maturity pressure.
Failing to shop multiple lenders leaves money on the table. Refinancing rates and terms vary significantly across lender types (banks, CMBS, agency, life companies, DSCR). Obtaining quotes from at least 3 to 5 lenders ensures competitive pricing. Colorado Springs borrowers who work with experienced commercial mortgage brokers often access a broader range of options than those who approach a single bank.
Ignoring prepayment costs on the existing loan can undermine refinancing economics. A prepayment penalty of 3% to 5% on a $2 million loan adds $60,000 to $100,000 to the refinancing cost, which may take years to recoup through rate savings.
Overestimating property value leads to appraisal shortfalls that reduce the available loan amount. Colorado Springs office property values have softened, and even industrial and retail valuations may not have appreciated as much as owners assume. A realistic value assessment before applying prevents surprises during underwriting.
Neglecting to update financial statements creates delays when lenders request current borrower financials. Having updated personal financial statements, tax returns, and property operating statements ready before starting the refinancing process streamlines the application.
How Can Colorado Springs Borrowers Optimize Their Refinancing Outcomes?
Strategic preparation significantly improves refinancing terms and outcomes for Colorado Springs property owners.
Maximize property income before refinancing by raising below-market rents, renewing expiring leases, and addressing vacancies. Every dollar of additional NOI increases the property's DSCR and supports a larger loan amount. Colorado Springs' tight retail and industrial markets provide leverage for rent increases that can materially improve refinancing qualification.
Reduce controllable expenses to improve NOI. Renegotiate service contracts, appeal property tax assessments with the El Paso County Assessor if the assessed value exceeds fair market value, and address deferred maintenance that might trigger lender-required reserves or capital escrows.
Consolidate debt when refinancing multiple properties. Portfolio refinancing allows stronger properties to support weaker ones within the same loan, potentially improving overall terms compared to individual property financing.
Time the refinancing to coincide with favorable market conditions and prepayment windows. The current rate environment, while higher than the 2020 to 2022 period, may represent a relative opportunity if rates increase further. Locking in current rates through a refinance provides certainty that floating-rate loans do not.
Leverage the defense economy connection. Colorado Springs properties with tenants connected to Fort Carson, Peterson SFB, Schriever SFB, NORAD, or the broader defense contractor network benefit from income stability that lenders reward with more favorable refinancing terms.
Contact Clearhouse Lending to discuss your Colorado Springs refinancing needs and get a customized analysis of your property's refinancing options.
Frequently Asked Questions About Commercial Refinancing in Colorado Springs
How soon can I refinance a commercial property in Colorado Springs?
Most conventional and CMBS lenders require a 6 to 12 month seasoning period for rate-and-term refinances and 12 to 24 months for cash-out refinances. SBA 504 refinances may have different seasoning requirements depending on the eligible purpose. Bridge loan refinances may be available with minimal seasoning, as the purpose is to transition from construction or bridge financing to permanent debt. The seasoning period begins from the date of purchase or from the closing of the most recent financing.
Can I refinance a commercial property with low occupancy in Colorado Springs?
Permanent refinancing typically requires 85% to 90% occupancy. Properties below these thresholds can pursue bridge refinancing at higher rates (8.5% to 12.0%) to replace maturing loans while working to improve occupancy. Industrial and retail properties in Colorado Springs, with metro vacancies of 5.4% and 4.9% respectively, generally meet occupancy thresholds. Office properties at 11.6% vacancy face more challenges and may need bridge refinancing if individual property occupancy falls below lender minimums.
What documents do I need for a commercial refinance in Colorado Springs?
A typical Colorado Springs commercial refinance package includes the current rent roll, trailing 12-month and year-to-date operating statements, three years of historical operating statements, copies of all leases and amendments, current mortgage statement, property insurance certificate, most recent El Paso County property tax bill, personal financial statement, two years of personal and business tax returns, schedule of real estate owned, and entity organizational documents. DSCR refinance programs eliminate the need for personal income documentation.
How long does a commercial refinance take in Colorado Springs?
Closing timelines for Colorado Springs commercial refinances range from 30 to 90 days depending on the program. Conventional bank refinances take 45 to 60 days. SBA 504 refinances require 60 to 90 days. CMBS refinances take 60 to 90 days. Bridge refinances can close in 14 to 30 days. DSCR refinances typically close in 30 to 45 days. Starting the process 6 months before loan maturity provides adequate time to shop rates, complete due diligence, and close without pressure.
Should I refinance my Colorado Springs commercial property if my rate will increase?
If your current loan is maturing and cannot be extended, refinancing at a higher rate is typically preferable to default. However, if your loan has years remaining before maturity, refinancing into a higher rate only makes sense if you need cash-out equity, want to switch from variable to fixed rates, or need to remove recourse. In many cases, Colorado Springs property owners with below-market rates should hold their existing loans to maturity and refinance only when necessary.
Are there tax implications when refinancing commercial property in Colorado Springs?
Refinancing a commercial property generally does not trigger a taxable event. Interest payments on the new loan remain deductible as a business expense. Cash-out refinance proceeds are not considered taxable income because they are loan proceeds, not earnings. However, refinancing costs (appraisal, legal, origination fees) must be amortized over the life of the new loan rather than deducted immediately. Consult with a tax advisor familiar with Colorado commercial real estate to understand the specific implications for your situation.
Moving Forward With Your Colorado Springs Commercial Refinance
Commercial refinancing in Colorado Springs requires careful analysis of current loan terms, property performance, market conditions, and available financing programs. The maturity wall affecting the national commercial real estate market creates urgency for many property owners, while the Pikes Peak region's strong fundamentals, particularly in the industrial and retail sectors, provide the income performance that lenders require for favorable refinancing terms.
Whether you are refinancing a maturing loan on an industrial warehouse near Peterson SFB, accessing equity in a retail center along the Briargate corridor, or restructuring debt on a multifamily property in the Powers growth area, understanding the full range of financing options ensures you secure the best available terms.
Contact Clearhouse Lending to discuss your Colorado Springs commercial refinancing needs and connect with lenders who specialize in the Pikes Peak region's defense-driven commercial real estate market.