| Detail | Explanation |
|---|---|
| Rate formula | Index plus spread, subject to any floor |
| Fixed-rate indexes | Treasury yields or swap rates matched to the loan term |
| Floating-rate indexes | SOFR for most bridge and debt fund loans, prime for many bank loans |
| What sets the spread | Leverage, coverage, asset type, sponsor, recourse, market, and loan size |
| Costs beyond the rate | Origination fees, exit fees, rate cap cost, reserves, and prepayment terms |
Where are the benchmark rates today?
Every commercial mortgage quote starts from 1 of the benchmarks below. The table pulls the latest published values from the Federal Reserve Bank of St. Louis, so it shows the index side of the formula as of its date. The lender adds the spread for your deal on top.
Watch the index that matches the loan you want. A 10-year fixed permanent loan tracks the 10-year Treasury far more closely than it tracks SOFR, and a floating bridge loan does the reverse.
| Benchmark | Latest value | As of | A year earlier | What it prices |
|---|---|---|---|---|
| Secured Overnight Financing Rate (SOFR) | 3.85% | September 17, 2026 | 4.38% | Floating-rate bridge, construction, and debt fund loans |
| Bank prime loan rate | 7.00% | September 17, 2026 | 7.25% | Bank construction loans, lines of credit, and SBA 7(a) loans |
| 5-year U.S. Treasury yield | 4.78% | September 17, 2026 | 3.62% | 5-year fixed-rate bank, CMBS, and life company loans |
| 10-year U.S. Treasury yield | 4.94% | September 17, 2026 | 4.06% | 10-year fixed-rate CMBS, agency, and life company loans |
Source: Federal Reserve Bank of St. Louis, FRED. SOFR, DPRIME, DGS5, DGS10
How is a commercial real estate loan rate built?
The note rate on almost every commercial loan comes from the same formula. The lender picks an index, adds a spread, and applies any floor written into the term sheet.
The index is the part nobody negotiates. The spread is the lender's price for the credit risk, the cost of its own capital, and its profit. The floor protects the lender if the index falls. Borrowers who compare quotes should compare spreads and floors on the same index, because the index will be identical for every lender quoting that day.
Note rate = index + spread (the index is never allowed below the floor)
Which index does each lender type use?
Lender types price over different benchmarks because they fund themselves differently. The pattern below is how quotes are usually structured. Individual lenders vary.
| Lender type | Usual index | How the rate behaves |
|---|---|---|
| Banks and credit unions | Prime, SOFR, or a Treasury or swap rate for fixed terms | Floating, or fixed for 3 to 10 years with a reset or maturity |
| CMBS lenders | Treasury or swap rate matched to the term | Fixed for the term, set at rate lock |
| Life insurance companies | Treasury yield matched to the term | Fixed, often locked at application |
| Fannie Mae and Freddie Mac multifamily | Treasury yields for fixed loans, SOFR for variable loans | Fixed or floating under program rules |
| Debt funds and bridge lenders | SOFR, usually with a floor | Floating, often with a required rate cap |
| Private lenders | Often a flat rate with no index | Fixed for a short term |
What moves the spread up or down?
2 borrowers can lock on the same day and pay very different rates. The difference is almost always in the spread, and lenders build it from a handful of risk factors.
- Leverage. A lower loan-to-value gives the lender more cushion and usually a tighter spread
- Coverage. A higher debt service coverage ratio means the property carries the payment with room to spare
- Asset type. Stabilized multifamily and industrial usually price tighter than hospitality, office, or specialty assets
- Sponsor. Net worth, liquidity, credit, and a track record with the property type all show up in the spread
- Recourse. A full guarantee can tighten pricing, while non-recourse terms usually cost more
- Business plan. A stabilized property prices tighter than one in lease-up or renovation
- Market and loan size. Liquid markets and loan sizes that fit a lender's sweet spot attract more competition
- Prepayment flexibility. Open prepayment costs more than yield maintenance or a step-down schedule
Hypothetical example: 3 ways to reach the same note rate
This hypothetical example uses round, made-up index and spread values to show the mechanics. None of these numbers is a market quote. Each structure starts at the same 6.50% note rate, but each one behaves differently after closing.
| Structure | Hypothetical index | Hypothetical spread | Note rate |
|---|---|---|---|
| 5-year fixed | 5-year Treasury at 4.50% | 2.00% | 6.50% for 5 years |
| Floating | SOFR at 3.50% | 3.00% | 6.50% today, resets monthly |
| Bank floating | Prime at 6.00% | 0.50% | 6.50% today, moves with prime |
How does the rate change the payment?
The quoted rate is only part of the payment. Amortization and the interest accrual method matter just as much. Using the same hypothetical $10,000,000 loan at 6.50%, interest-only payments total $650,000 a year. A 30-year amortization raises debt service to $758,482 a year, a loan constant of 7.58%.
Most commercial loans accrue interest on an actual/360 basis. The lender charges the annual rate divided by 360 for each of the 365 days in the year, so the same interest-only loan costs $659,028 a year. Read the accrual clause before you compare 2 quotes that look identical.
| Payment structure | Annual payment |
|---|---|
| Interest-only, 30/360 | $650,000 |
| Interest-only, actual/360 | $659,028 |
| 30-year amortization | $758,482 |
Why the rate also sets your loan amount
Lenders size most permanent loans to a minimum coverage ratio, so a higher rate shrinks proceeds even when the property is unchanged. In this hypothetical case, the property earns $900,000 of net operating income and the lender requires 1.25x coverage on a 30-year amortizing payment, which caps annual debt service at $720,000 a year.
Each 1.00% move in the rate changes the maximum loan by $911,591 to $1,074,657 in this example. That is why a rate change between application and lock can force more equity into a deal. Run your own numbers in the loan sizing calculator.
| Note rate | Loan constant | Maximum loan |
|---|---|---|
| 5.50% | 6.81% | $10,567,306 |
| 6.50% | 7.58% | $9,492,649 |
| 7.50% | 8.39% | $8,581,058 |
What costs sit outside the rate?
A lower rate can still be the more expensive loan. Fees, reserves, and exit terms change the real cost of capital, especially on shorter holds. A 1.00% origination fee on the hypothetical $10,000,000 loan costs $100,000 at closing and adds about 0.20% a year if the loan stays in place for 5 years and much more if it pays off early.
- Origination and processing fees charged at closing
- Exit fees charged at payoff, common on bridge and debt fund loans
- Rate cap purchases on floating-rate loans, covered in interest rate cap
- Prepayment terms, including yield maintenance, defeasance, and step-down penalties
- Rate lock deposits and breakage costs if a locked loan does not close
- Tax, insurance, replacement, and leasing reserves that tie up cash
- Lender legal fees, appraisal, environmental, and property condition reports
How to get a real rate for your deal
Published averages cannot tell you where your loan will price, because the spread depends on your property, your leverage, and your sponsorship. The fastest route to a real number is to put the same deal in front of several lender types on the same day and compare spreads, floors, fees, and prepayment terms side by side.
Capital Partners arranges commercial real estate debt from $1M to $100M across banks, agency lenders, life companies, CMBS, and debt funds. Send the property, the loan request, and the business plan through submit a deal and the request is matched to lenders whose criteria fit it.
Sources
Rate notes from Capital Partners
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Common questions
What is the current commercial real estate loan rate?
There is no single current rate. Each loan prices as an index plus a spread, and the index changes daily while the spread depends on the property, leverage, and sponsor. The benchmark table on this page shows today's index values. A lender adds the spread after reviewing your deal.
Are commercial mortgage rates higher than residential mortgage rates?
Commercial loans are priced by a different process. The lender underwrites the property's income, the borrower entity, and the business plan, then sets a spread for that specific risk. Terms are usually shorter, and prepayment penalties are common, so compare commercial quotes against each other only.
Is SOFR or the 10-year Treasury more important for my loan?
It depends on the loan. Floating-rate bridge, construction, and debt fund loans move with SOFR. Fixed-rate permanent loans from CMBS lenders, life companies, and agencies usually price over the Treasury yield that matches the loan term.
Can I negotiate the rate on a commercial loan?
You can negotiate the spread, the floor, fees, and prepayment terms, but not the index. Competition between lenders is the strongest tool. Lower leverage, stronger coverage, and flexible recourse terms can also tighten the spread.
When is a commercial loan rate locked?
Fixed-rate loans usually lock at application, at commitment, or shortly before closing, depending on the lender. Until the lock, the index can move. Read the rate lock terms for deposits and breakage costs before you sign.
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