CMBS loans are another way to secure funding for an investment property and real estate. These are used for commercial acquisitions, such as apartment buildings, offices, or worksites. Contrary to conventional loans where the borrower repays the lender over time CMBS or conduit loans are sold and bundled into bonds which are then sold to bond buyers and investors.
If you are unable to make the payments on your conduit loan, it will be handed off to a special servicer who will deal modify the terms or deal with collections.
Advantages of CMBS or Conduit Loans
Perhaps the biggest draw to Conduit loans is the lower than usual interest rates. These typically are better than what you would find with a conventional lender and traditional loan terms. Conduit loans often offer fixed interest rates, which can make it easier to plan and repay the loan later.
Personal Responsibility Related to CMBS Loans
Something else to know about conduit loans is that they are nonrecourse types of loans. Not familiar with nonrecourse lending? This is when the buyer is not personally responsible for paying back the commercial loan. There are caveats, however, regarding damage or harm caused to the property or lender. Read and understand the terms of your loan accordingly.
Assuming CMBS Loans
CMBS or conduit loans are assumable, which provides borrowers the opportunity to pass along the financing to a buyer if the borrower decides to sell the property later on. There is likely a fee imposed by your lender for this transfer.
Does a conduit or CMBS loan sound like a good fit for your commercial investment? A conduit loan is an alternative to traditional bank financing when you have obstacles standing in the way, such as high-interest rates from lenders. Talk to the money professionals at Triport to learn more about your borrowing options!