Commercial Mortgage Rates Explained: What Drives Your Cost of Capital
If you're financing an office building, retail center, multifamily property, or mixed-use asset, the rate you pay on a commercial mortgage directly shapes your cash-on-cash return. But commercial pricing isn't a single published number — lenders build your rate from several risk factors specific to the property and the borrower.
Here's what drives commercial mortgage rates and how to position your deal for the best pricing.
What Affects Commercial Mortgage Rates?
Property Type
Different asset classes carry different risk profiles. Multifamily generally commands the lowest rates, followed by office and retail, with mixed-use and specialty commercial properties priced higher.
Loan-to-Value (LTV)
The lower your LTV, the lower the risk — and typically the lower your rate. Most commercial mortgages cap out around 70–75% LTV for stabilized properties.
Debt Service Coverage Ratio (DSCR)
Lenders want the property's net operating income to comfortably cover the debt. A DSCR above 1.25 generally unlocks better pricing; anything near 1.0 carries a premium.
Borrower Credit and Liquidity
Your credit score, net worth, and reserves influence the rate. Strong personal financials can move pricing even on an asset-based loan.
Loan Term and Amortization
Shorter terms and longer amortizations affect pricing. A 5-year fixed with a 25- or 30-year amortization is standard; longer fixed periods cost more.
Typical Commercial Rate Structures
- Fixed-rate commercial mortgages — Rate locked for the full term; predictable payments
- Variable/adjustable rates — Often lower initially, but exposed to rate movement
- Bridge and hard money — Short-term, higher-rate financing for acquisitions or repositionings
How to Qualify for the Best Commercial Rate
- Stabilize the property — Lease it up and document strong operating income
- Lower your LTV — Bring more equity to reduce lender risk
- Maintain reserves — Lenders reward liquidity and net worth
- Improve your DSCR — Higher NOI relative to debt unlocks better terms
- Strengthen credit — A clean personal credit profile supports asset-based pricing
Financing Your Commercial Property
Whether you're acquiring, refinancing, or repositioning a commercial asset, the right structure protects your yield. Start an application and we'll review your property's financials, LTV, and DSCR to pair you with the most competitive commercial mortgage program. Explore our full commercial lending options for more.