There’s no single “commercial mortgage.” Six lender types, each with its own appetite for risk, leverage, and structure — and how to match your deal to the right one.
There’s no single “commercial mortgage.” The right loan depends on the asset, the business plan, and where the property sits in its life cycle. Most CRE debt comes from one of six lender types, each with its own appetite for risk, leverage, and structure — and matching the deal to the right source is most of the job.
Banks and credit unions
The most common starting point. Banks and credit unions are relationship lenders that offer competitive rates and flexibility, especially on smaller, local, and stabilized deals.
- Best for: acquisition and refinance of stabilized assets; construction for established sponsors; local deals.
- Leverage: moderate, often up to 65%–75% LTV.
- Recourse: frequently full or partial recourse.
- Trade-off: relationship-driven and flexible, but leverage and terms vary widely by institution and balance-sheet appetite.
Life insurance companies
Life companies lend their own long-term capital and prize stability, offering some of the lowest fixed rates available on conservative terms.
- Best for: high-quality, stabilized assets with durable income.
- Leverage: conservative, often 55%–65% LTV.
- Recourse: typically non-recourse.
- Trade-off: excellent rate and certainty, but lower leverage and selective on asset quality and location.
Agencies (Fannie Mae, Freddie Mac, HUD)
The dominant source for multifamily. Agency execution offers attractive rates, high leverage, and long terms.
- Best for: multifamily, including affordable and seniors housing.
- Leverage: high, often up to 75%–80%.
- Recourse: typically non-recourse.
- Trade-off: outstanding terms for qualifying multifamily, but program rules and timelines are specific.
Debt funds and bridge lenders
Flexible, fast capital for assets that aren’t yet stabilized — value-add, lease-up, repositioning, or construction.
- Best for: transitional and value-add deals; speed and certainty of execution.
- Leverage: higher, often up to 70%–80% of cost.
- Recourse: often non-recourse with carve-outs.
- Trade-off: higher rate (usually floating over SOFR), but flexibility and speed balance-sheet lenders can’t match.
CMBS (conduit) lenders
Loans pooled and sold into commercial mortgage-backed securities, built for stabilized, cash-flowing assets that fit standard underwriting.
- Best for: stabilized assets seeking fixed-rate, non-recourse debt, including secondary markets.
- Leverage: up to roughly 70%–75% LTV.
- Recourse: non-recourse with standard carve-outs.
- Trade-off: competitive fixed rate and leverage, but rigid servicing and prepayment (defeasance or yield maintenance).
Which one fits your deal?
| Lender | Sweet spot | Leverage | Rate | Recourse |
|---|---|---|---|---|
| Bank / credit union | Stabilized, local, smaller | Moderate | Competitive | Often recourse |
| Life company | Best-in-class stabilized | Lower | Lowest fixed | Non-recourse |
| Agency | Multifamily | High | Attractive | Non-recourse |
| Debt fund / bridge | Transitional / value-add | Higher | Higher (floating) | Non-recourse + carve-outs |
| CMBS | Stabilized, fixed, non-recourse | Up to ~75% | Competitive fixed | Non-recourse |
The point of a competitive process is that two of these will quote your deal very differently — and the cheapest rate isn’t always the best execution once leverage, recourse, and flexibility are weighed.
How Mercury helps
We know which lenders are active for your asset type, market, and business plan, and we run a competitive process to find the best fit — not just the first quote — where we’re licensed or exempt. Discuss your financing scenario.
Frequently asked questions
What’s the cheapest source of commercial real estate debt?
Life companies and agencies (for multifamily) often offer the lowest fixed rates, but they’re selective and conservative on leverage. The cheapest rate isn’t always the best overall execution.
What lender should I use for a value-add deal?
Transitional and value-add deals usually fit debt funds or bridge lenders, which offer higher leverage and speed, then refinance into permanent debt once the asset stabilizes.
Are commercial real estate loans recourse or non-recourse?
It depends on the lender and structure. Banks often require recourse; life companies, agencies, debt funds, and CMBS are typically non-recourse with standard carve-outs.