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The Commercial Capital Gazette
Commercial Mortgage and Real Estate News
Published By 1st Coastal Commercial Capital
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Average Commercial Real Estate Loan Rates for 2019

Compare Small Business Loans

For 2019, the average interest rate on a commercial real estate loan is around 4% to 5%. The actual interest rate you secure on a loan depends on the type of loan you choose, your qualifications as a borrower, and the type of building or project you’re financing. To help you compare rates, we reviewed over a dozen types of loans and properties to compile the average interest rates for commercial mortgages.

Average Commercial Real Estate Loan Rates by Loan Type
Depending on the type of loan you choose, interest rates will range from 4% to 30%. Government-backed loans, such as Small Business Administration (SBA) or USDA loan, and conventional commercial mortgages will generally offer the most competitive interest rates and the highest loan-to-value (LTV) ratios.
Loan
Average Rates
Avg. LTV Ratio
Typical Min. Loan Size
Typical Max. Term
SBA 504 Loan
4.38% - 4.49%
80% - 90%
$1 million
20 years
SBA 7(a) Loan
5.25% - 9.25%
80% - 90%
$350,000
25 years
USDA Business & Industry Loan
5.25% - 9.25%
75% - 80%
$200,000
30 years
Traditional Bank Loan
4.20% - 8.00%
70% - 80%
$1 million
30 years
Online Loan
7.00% - 30.00%
70% - 90%
$50,000
5 years
Construction Loan
5.50% - 6.50%
60% - 80%
$1 million
2 years
Conduit (CMBS) Loan
4.30% - 5.00%
70% - 75%
$2 million
10 years
Insurance Loan (incl. Life)
4.40% - 4.60%
60% - 75%
$5 million
30 years
FHA Hospital/Senior Care Loan
3.80% - 4.70%
75% - 83%
$3-5 million
30 years
Fannie Mae Apartment Loan
3.01% - 5.06%
70% - 80%
$750,000
30 years
Freddie Mac Apartment Loan
3.59% - 4.27%
70% - 80%
$1 million
10 years
Bridge Loan
9.00% - 13.00%
80% - 90%
$1 million
1 year
Soft Money Loan
6.50% - 17.50%
60% - 65%
$150,000
8 years
Hard Money Loan
10.00% - 20.00%
50% - 55%
$150,000
2 years
The application process for a traditional commercial real estate loan requires a lot of time and documentation to complete, and prime or near-prime borrowers are most likely to qualify. If you have a lower credit score or less-than-stellar business finances, or the financed property needs renovation, you'll pay higher interest rates and have to put more money down in order to get a conventional commercial real estate loan. In this situation, you should consider commercial mortgage companies that specialize in subprime lending, or look for bridge, soft or hard money loans. We have multiple capital sources that can fulfill these requests. Apply Here

Average Commercial Real Estate Loan Rates for Investment Properties
Interest rates on investment property loans can be as low as 3.8%. However, the loan-to-value ratios on these loans will be lower than owner-occupied commercial real estate loans, meaning that you’ll be required to put more money down. On average, the loan-to-value ratio for these types of loans is between 65% and 75%. So, if you purchase a $1 million building, the lender may only give you a loan for $700,000, meaning that you’ll have to put $300,000 down.

Building Type
Average Rates
Avg. LTV Ratio
Avg. Terms
Avg. Amortization Period
Apartment complex
3.0% - 8.5%
70% - 75%
20 years
26 years
Office building
3.2% - 8.5%
70% - 75%
8 years
30 years
Retail building
3.0% - 9.9%
65% - 75%
6 years
25 years
Restaurant
3.7% - 13.3%
60% - 70%
7 years
22 years
Industrial building
3.0% - 8.5%
65% - 75%
11 years
25 years
Hotel or motel
3.4% - 13.8%
65% - 70%
8 years
23 years
Golf course
3.4% - 14.2%
65% - 70%
9 years
22 years
Health care/senior housing
3.4% - 9.9%
65% - 75%
14 years
25 years
RV, mobile home or campground
3.2% - 11.1%
65% - 75%
9 years
26 years
Self-storage
3.3% - 8.5%
65% - 75%
6 years
28 years
Special purpose buildings
3.8% - 14.0%
60% - 70%
8 years
23 years
Regional banks, credit unions and commercial mortgage companies are the best options for obtaining an investment property loan. However, banks tightened their credit requirements after the financial crisis of 2009, so you’ll need to be a strong borrower (it has been estimated that 80 to 90% of their applications get denied). To qualify, you need a good personal credit score, a proven track record of managing investment properties, a strong investment pitch and sufficient cash to put as a down payment. We are prepared to shop around to get the best deal and to negotiate the terms of the loan contract.

Average Commercial Real Estate Loan Rates for Building an Investment Property

You’ll pay higher interest rates for building rather than purchasing an investment property—rates currently range from 5% to 12%—because constructing a new building is a riskier endeavor than purchasing a finished one, so banks charge higher interest rates to compensate for this risk. However, the loan-to-value ratio on a construction loan is generally higher than on a standard investment property loan, so you don't have to put as much cash down. Construction loans, sometimes referred to as interim financing, also have shorter maturities than investment property loans since you're expected to pay back the loan once the building is complete. Maturities for construction loans typically range from one to three years. Many constructions loans are not amortized and thus require interest-only payments with a final balloon payment at the end of the term.
Building Type
Average Rates
Avg. LTV Ratio
Avg. Terms
Apartment complex
4.7% - 10.7%
75% - 85%
26 months
Office building
5.2% - 10.7%
80% - 85%
18 months
Retail building
5.2% - 11.0%
75% - 85%
18 months
Restaurant
5.7% - 12.4%
70% - 80%
18 months
Industrial building
5.2% - 11.1%
75% - 85%
18 months
Hotel or motel
5.5% - 11.3%
75% - 85%
18 months
Golf course
5.8% - 11.5%
75% - 80%
18 months
Health care/senior housing
5.2% - 11.1%
75% - 80%
18 months
RV, mobile home or campground
5.2% - 11.1%
75% - 85%
18 months
Self-storage
5.2% - 11.0%
75% - 85%
18 months
Special purpose buildings
5.6% - 12.4%
70% - 75%
18 months
What to Consider When Shopping for a Commercial Mortgage 

Buying or building commercial property is a huge undertaking for your business or for yourself as an investor. You should be prepared to identify the best capital source for your situation and negotiate to get the best deal possible.
When it comes to choosing a type of loan, small business owners should consider a government-backed loan program—such as an SBA 504 loan or a USDA Business loan. These loans are easier to qualify for than traditional commercial mortgages, while still carrying competitive interest rates. However, these programs are generally only available to borrowers purchasing or building owner-occupied properties. Borrowers whose qualifications are lacking—or who are purchasing properties that need renovation—should consider alternative options, such as a bridge loan or a hard money loan.
When you have a loan offer, make sure to carefully read the contract. Some lenders will require personal guarantees for each owner of the business or require that you pay out of pocket for any building inspections or environmental reports. Contracts may also include certain clauses that could void the entire contract if they're violated. Understand all of the fine print of the contract to make sure you aren’t taking on too much risk as a borrower. Lenders usually expect some back and forth on the offer, so you shouldn’t be afraid to negotiate—especially if you have more than one offer. Review the contract with an attorney or legal advisor, who can help you better understand and negotiate the finer points of the contract.