Over $1.5 trillion in commercial real estate loans will mature by the end of 2026, and San Jose property owners are not immune to this wave. Whether you hold a multifamily building, an office complex, a retail center, or an industrial facility in Silicon Valley, your existing loan may be approaching maturity at a time when refinancing rates are significantly higher than your original terms. Understanding your refinance options, structuring the transaction effectively, and leveraging San Jose's strong market fundamentals can help you navigate this challenging environment and position your property for long-term success.
This guide covers the commercial refinance landscape for San Jose properties in 2026, including rate-and-term refinancing, cash-out strategies, the Proposition 13 advantage, and how to handle loan maturities in a higher-rate environment.
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What Types of Commercial Refinance Loans Are Available in San Jose?
San Jose commercial property owners have access to several refinancing structures, each suited to different situations and objectives.
Rate-and-Term Refinance: The most straightforward refinance replaces your existing loan with a new one at current market rates and terms. If your current rate is higher than today's market (common for loans originated in 2023 or 2024), a rate-and-term refinance can reduce your monthly payments and improve cash flow. Permanent loans with fixed rates for 5 to 10 years and 25 to 30 year amortization are the standard structure.
Cash-Out Refinance: If your San Jose property has appreciated significantly or your loan balance has amortized substantially, a cash-out refinance allows you to extract equity while replacing your existing loan. The cash can fund property improvements, portfolio expansion, or other investment needs. Under California's Proposition 13, refinancing does not trigger a property tax reassessment, preserving your favorable tax basis.
Bridge-to-Permanent Refinance: If your property is transitioning from a bridge loan or has recently completed a value-add repositioning, refinancing into permanent debt locks in a fixed rate and longer term once the property is stabilized. Bridge loans are designed to be replaced by permanent financing once the business plan is executed.
CMBS Refinance: For larger San Jose properties ($5 million and above), CMBS (Commercial Mortgage-Backed Securities) loans offer non-recourse refinancing with competitive rates. These work best for stabilized properties with strong cash flow and creditworthy tenants.
Agency Refinance (Multifamily): Fannie Mae and Freddie Mac offer the most competitive refinancing terms for multifamily properties with 5 or more units. Agency loans feature low rates, non-recourse terms, high LTV (up to 80%), and 30-year amortization, making them the preferred refinance vehicle for San Jose apartment owners.
SBA Refinance: Business owners who occupy their commercial property can refinance through SBA 504 or 7(a) programs, potentially lowering their rate and monthly payment while accessing equity for business growth.
What Is the CRE Maturity Wall and How Does It Affect San Jose?
The commercial real estate "maturity wall" refers to the unprecedented volume of commercial loans coming due in 2025 and 2026, creating a wave of mandatory refinancing activity.
Scale of the Challenge: Nearly $1 trillion in commercial real estate loans matured in 2025, and an estimated $936 billion more are set to mature in 2026, approximately 19% more than the 2025 volume. Many loans that were originally due in 2024 and 2025 have been extended by lenders, pushing additional volume into 2026.
Rate Shock: The average interest rate on maturing loans is approximately 4.76%, while current refinancing rates average 6.24% or higher. This roughly 150 basis point increase translates to significantly higher debt service payments, reduced cash flow, and in some cases, the need for additional equity to complete the refinance.
Valuation Gap: For some property types (particularly office), valuations have declined enough that traditional refinancing at prior LTV levels is no longer possible. A loan that once could refinance 75% of a property's value may now be limited to 55% to 60%, creating a capital gap.
San Jose Specifics: San Jose's commercial real estate market is bifurcated. Multifamily properties benefit from strong fundamentals (3.2% vacancy, 4.3% projected rent growth), making refinancing relatively straightforward. Office properties face much steeper challenges with 19.4% vacancy and expanding cap rates. Retail and industrial properties fall somewhere in between.
What Are Current Commercial Refinance Rates in San Jose?
Refinance rates in San Jose vary by property type, occupancy, loan structure, and borrower strength. Here is the current rate landscape for 2026.
Multifamily (Agency): Fannie Mae and Freddie Mac refinance rates for qualifying multifamily properties range from 5.25% to 6.00%, representing the most competitive commercial real estate financing available. Properties must have 5+ units, 90%+ occupancy, and stabilized operations.
Multifamily (Non-Agency): For multifamily properties that do not qualify for agency lending (smaller properties, lower occupancy, or borrower issues), non-agency rates range from 6.00% to 7.00%.
Office (Stabilized): Refinance rates for well-occupied (75%+) office buildings range from 6.00% to 7.50%, depending on tenant credit quality and remaining lease terms.
Retail (Stabilized): Refinance rates for occupied retail properties range from 5.75% to 7.00%, with NNN properties and those with credit tenants on the lower end.
Industrial/Flex: Rates of 5.50% to 6.50% are available for well-leased industrial and flex properties, reflecting the strong fundamentals in the industrial sector.
Bridge Refinance: If your property is not yet stabilized or needs additional time for lease-up, bridge refinance rates range from 7.50% to 9.50% with 12 to 36 month terms.
Use our commercial mortgage calculator to model different refinancing scenarios for your San Jose property.
How Does Proposition 13 Benefit San Jose Property Owners Who Refinance?
California's Proposition 13, passed in 1978, provides a significant advantage for commercial property owners considering refinancing or cash-out transactions.
No Reassessment on Refinance: Refinancing your San Jose commercial property does not trigger a property tax reassessment under Proposition 13. Your assessed value remains at the original purchase price (plus no more than 2% annual increases), regardless of how many times you refinance or how much equity you extract through cash-out transactions.
The Prop 13 Advantage Quantified: Consider a San Jose office building purchased for $5 million in 2010. Under Prop 13, the assessed value in 2026 would be approximately $6.6 million (with 2% annual increases), while the actual market value might be $10 million or more. The annual property tax savings compared to a reassessment at market value could exceed $35,000 per year.
Cash-Out Without Tax Consequences: This means you can refinance your property, extract significant equity, and deploy that capital into additional investments or property improvements, all without increasing your property tax burden. This makes cash-out refinancing particularly attractive for long-held San Jose properties that have built substantial equity.
Comparison to a Sale: If you sold the property and purchased a new one, the new property would be assessed at the current purchase price, potentially doubling or tripling your annual property tax. Refinancing preserves the Prop 13 basis while still allowing you to access equity.
Strategic Implications: For San Jose property owners with significant accumulated equity, cash-out refinancing combined with Prop 13 protection creates a powerful wealth-building strategy. You can leverage the equity in existing properties to acquire additional assets while maintaining favorable tax treatment on your existing holdings.
When Should San Jose Property Owners Consider Refinancing?
Several scenarios warrant exploring refinance options for your San Jose commercial property.
Approaching Loan Maturity: If your current loan matures within the next 12 to 18 months, begin the refinance process now. Waiting until the last minute limits your options and negotiating leverage. Start gathering property financials, rent rolls, and tenant information early.
Rate Improvement Opportunity: If your current rate is above 7% (common for loans originated in 2023 or early 2024), today's rates in the 5.5% to 6.5% range for stabilized properties represent a meaningful savings. On a $5 million loan, a 1% rate reduction saves approximately $50,000 per year.
Property Value Increase: San Jose's multifamily and industrial properties have generally appreciated over the past two years, potentially allowing a cash-out refinance that returns equity for reinvestment. Properties that have benefited from rent growth, renovations, or improved occupancy are particularly strong candidates.
Adjustable Rate Reset: If your current loan has an adjustable rate that is resetting to a higher level, refinancing into a fixed-rate product provides payment certainty and protects against future rate increases.
Portfolio Restructuring: If you are looking to consolidate multiple loans, extend maturities across your portfolio, or free up capital for new acquisitions, a strategic refinance program can optimize your overall debt structure.
Post-Bridge Stabilization: If you acquired a property with a bridge loan and have successfully executed your business plan (renovations, lease-up, repositioning), refinancing into permanent debt at a lower rate and longer term is the natural next step.
How Are Lenders Evaluating San Jose Refinance Applications in 2026?
Lender standards for refinancing have tightened since 2022, and understanding current underwriting criteria helps you prepare a strong application.
Debt Service Coverage Ratio (DSCR): Lenders require minimum DSCR of 1.25x for most property types, with office properties often requiring 1.30x to 1.50x. The higher rate environment means your property needs to generate more NOI to meet these thresholds compared to when you originally financed.
Loan-to-Value (LTV): Maximum LTV ratios have compressed across most property types. Multifamily properties can still achieve 75% to 80% LTV through agency lenders. Office properties are often limited to 55% to 65% LTV. Retail and industrial generally fall in the 65% to 75% range.
Property Performance: Lenders want to see stable or improving occupancy, consistent rent collections, and manageable operating expenses. Properties that have maintained strong performance through the rate cycle are well-positioned for competitive refinancing.
Market Position: San Jose properties in strong locations (near transit, in growing submarkets, with quality tenant bases) receive more favorable underwriting than properties in secondary locations or challenged submarkets.
Borrower Strength: While non-recourse options are available for the strongest properties, many refinance transactions now require personal guarantees or partial recourse. Borrower net worth, liquidity, and credit history influence both terms and pricing.
Explore San Jose commercial loan options for a comprehensive view of refinancing strategies.
What Are Cash-Out Refinance Strategies for San Jose Properties?
Cash-out refinancing allows you to extract accumulated equity from your San Jose property while replacing your existing loan. Here are common strategies.
Property Improvement Funding: Extract equity to fund renovations, energy efficiency upgrades, or amenity improvements that increase the property's value and rental income. In San Jose's competitive market, updated properties command premium rents and attract higher-quality tenants.
Portfolio Expansion: Use cash-out proceeds as the down payment on additional investment properties. A cash-out refinance on a $3 million San Jose multifamily property at 70% LTV could provide $600,000+ in proceeds for acquiring the next property.
Debt Consolidation: If you have multiple loans on different properties, a cash-out refinance on your strongest asset can provide funds to pay off higher-rate debt on other properties, optimizing your overall portfolio financing.
Business Capital: For owner-occupied properties, cash-out proceeds can fund business expansion, equipment purchases, or working capital needs without the higher rates associated with business lines of credit.
Reserve Building: In an uncertain rate environment, maintaining liquid reserves provides flexibility to capitalize on opportunities or weather economic disruptions. Cash-out refinancing can build reserves while locking in a known debt service payment.
What Are the Key Risks of Refinancing in the Current Market?
San Jose property owners should evaluate several risk factors before proceeding with a refinance.
Higher Rates Than Original Loan: If your existing loan was originated when rates were 3.5% to 4.5%, refinancing at 5.5% to 6.5% will increase your monthly payment significantly. On a $5 million loan, a 2% rate increase adds approximately $100,000 per year to debt service.
Reduced Proceeds: Lower LTV ratios and potentially lower appraised values (particularly for office properties) may mean your new loan is smaller than your existing balance, requiring you to bring cash to closing.
Prepayment Penalties: Many commercial loans include prepayment penalties (yield maintenance, defeasance, or step-down penalties) that can cost 1% to 5% of the loan balance. These costs must be factored into the refinance analysis to determine if the transaction makes economic sense.
Appraisal Risk: If your property appraises at a lower value than expected, the maximum loan amount will be reduced, potentially creating a gap between your existing balance and the new loan proceeds.
Market Uncertainty: While San Jose's fundamentals are generally strong, uncertainty about interest rate direction, tech sector employment, and commercial real estate valuations creates risk that future conditions could differ from current projections.
How Should San Jose Property Owners Prepare for a Refinance?
Proper preparation significantly improves your refinance outcome. Here is a timeline and checklist for San Jose property owners.
12 to 18 Months Before Maturity: Begin evaluating your refinance options. Review your current loan terms, prepayment provisions, and maturity date. Assess your property's current value and income relative to when you originally financed. Identify any deferred maintenance or tenant issues that should be addressed before applying.
9 to 12 Months Before Maturity: Engage with lenders or a commercial mortgage broker to understand available terms. Order a preliminary property valuation or broker opinion of value. Begin assembling documentation including rent rolls, operating statements, tax returns, and property condition information.
6 to 9 Months Before Maturity: Submit loan applications to multiple lenders to compare terms. Ensure your property is performing at its best (high occupancy, current on maintenance, strong rent collections). Address any environmental, legal, or title issues that could delay closing.
3 to 6 Months Before Maturity: Select your lender, lock your rate (if available), and move through the underwriting process. Coordinate with your existing lender on payoff requirements and timing. Plan for any cash needed at closing.
At Closing: Complete the refinance, pay off the existing loan, and establish your new debt service payment. If doing a cash-out refinance, deploy the proceeds according to your investment strategy.
Frequently Asked Questions
Does refinancing my San Jose property trigger a property tax reassessment?
No. Under California's Proposition 13, refinancing a commercial property does not constitute a change in ownership and therefore does not trigger a property tax reassessment. Your assessed value remains at the original purchase price (plus allowable annual increases of up to 2%). This applies to both rate-and-term refinances and cash-out refinances, making refinancing particularly attractive for long-held properties with significant equity.
What is the minimum equity required for a San Jose commercial refinance?
Minimum equity requirements vary by property type and loan program. Multifamily properties can typically refinance at up to 75% to 80% LTV through agency lenders, requiring 20% to 25% equity. Office properties currently require 35% to 45% equity (55% to 65% LTV). Retail and industrial properties generally require 25% to 35% equity. For cash-out refinances, lenders may require an additional 5% to 10% equity cushion beyond rate-and-term LTV maximums.
How long does it take to close a commercial refinance in San Jose?
Timelines vary by loan type. Agency multifamily refinances typically close in 45 to 60 days. Conventional permanent refinances take 45 to 75 days. CMBS refinances may require 60 to 90 days. Bridge refinances can close in as little as 21 to 30 days when time is critical. Starting the process well before your loan maturity date provides the most flexibility and best terms.
Can I refinance a San Jose office building given the high vacancy rates?
Yes, though terms will depend heavily on your specific property's occupancy and tenant quality. Well-occupied (75%+) office buildings with creditworthy tenants and long remaining lease terms can still secure competitive permanent financing. Properties with higher vacancy may need to refinance into a bridge loan that provides time for lease-up before transitioning to permanent debt. The most challenged properties may require additional equity or mezzanine financing to complete the refinance.
What prepayment penalties should I expect when refinancing?
Prepayment penalties vary by your existing loan type. Fixed-rate loans often include yield maintenance or defeasance provisions that can be costly (3% to 5% of the balance). Adjustable-rate loans may have step-down penalties (commonly 3-2-1 or 5-4-3-2-1 structures). Some loans have open prepayment windows near maturity where no penalty applies. Review your existing loan documents carefully and factor any penalty into your refinance analysis. Contact our team to help evaluate your specific situation.
Should I do a cash-out refinance or sell my San Jose property?
This depends on your investment objectives, tax situation, and market outlook. Cash-out refinancing preserves your Proposition 13 tax basis, avoids capital gains taxes, and lets you maintain ownership of an appreciating asset while accessing equity. Selling generates maximum liquidity but triggers capital gains taxes and a Prop 13 reassessment on any replacement property. If you believe San Jose's market will continue to appreciate and you want to grow your portfolio, cash-out refinancing is typically the more tax-efficient strategy.
Ready to Refinance Your San Jose Commercial Property?
Whether you are navigating a maturing loan, seeking to extract equity through a cash-out refinance, or looking to lock in a lower fixed rate, the right refinance strategy can strengthen your financial position and set your San Jose property up for long-term success. With Proposition 13 protecting your tax basis and San Jose's strong market fundamentals supporting property values, refinancing is a powerful tool for commercial property owners in Silicon Valley.
Explore commercial refinance programs, review bridge financing options for transitional properties, or contact our team to discuss your San Jose commercial refinance needs.