In the middle of March 2025, commercial mortgage rates are still being shaped by a variety of factors, with the federal funds rate sitting at 4.25% to 4.50%. After the Federal Reserve opted to maintain this range in January, few experts expect a rate cut in the upcoming March meeting. Projections indicate potential cuts later in the year, likely not until June. While financing is generally cheaper today than it was last summer, questions remain about what’s next. Will rates fall further? It’s uncertain.

For commercial real estate borrowers, it’s crucial to understand that while the federal funds rate is important, it isn’t the sole factor influencing your loan rate. The 10-year Treasury yield often provides a better indication for commercial real estate loans. But even more than benchmark rates, the final rate you’re offered will depend on various factors like the property type, borrower creditworthiness, and the economy’s health.

Different Interest Rates for Different Loans

Commercial mortgage rates aren’t one-size-fits-all. Rates vary depending on the asset class, location, tenant mix, property type, loan terms, and other factors. These elements are all carefully considered during underwriting. At EB Mortgage, we specialize in analyzing property financials and leveraging the right scenarios with the right lenders to reduce costs and maximize returns for our clients. Whether you’re looking for office, retail, multifamily, or industrial financing, we ensure the best deal possible.

How Are Commercial Mortgage Rates Determined?

Commercial mortgage rates aren’t just based on a simple spread over an index. The rates you’re quoted will differ based on the lender’s risk assessment. Higher risk means higher rates, and a variety of factors contribute to this risk assessment.

Key Factors Affecting Commercial Mortgage Rates

1. Property Type Lenders consider the type of property tied to the loan. For instance, retail and hospitality properties tend to carry higher risk than multifamily or industrial facilities. The condition of the asset also plays a role. A dated office park may carry a higher rate than a new, high-demand downtown building.
2. Borrower Creditworthiness Your credit score and investment history directly impact the rate you’ll be offered. Borrowers with strong credit and a solid track record of successful investments are more likely to receive favorable rates.
3. Loan Terms The terms of the loan, including duration and fixed versus variable rates, also influence the interest rate. Short-term loans, such as bridge loans, carry higher rates due to their higher risk. Loans with higher loan-to-value ratios are also typically priced higher.
4. Economic Conditions The state of the economy also affects interest rates. A strong economy generally boosts property values, making lenders more willing to offer lower rates. In contrast, a weaker economy may cause property values to fall, increasing the risk for lenders, who in turn raise rates to mitigate that risk.

How to Choose the Best Commercial Loan for Your Needs

While many factors are beyond your control, such as economic conditions or the inherent risk of property types, there are ways you can optimize your loan rate.

• Improve Your Credit Raising your credit score can significantly lower your interest rate. Even a small improvement in your score can make a big difference in the rates lenders are willing to offer. However, boosting your credit score takes time, so it may not be a quick fix if you need funding immediately.
• Reevaluate Loan Terms If you need to refinance or secure a loan quickly, consider adjusting your loan terms. Opting for a lower loan-to-value ratio can lead to better rates. While it may require more upfront investment in the property, the long-term benefits of lower financing costs can make this a worthwhile strategy.

While interest rates for commercial real estate loans are influenced by a variety of factors, understanding how they work—and what you can control—can help you secure the best deal. At EB Mortgage, our experienced lenders will guide you through the process, leveraging our knowledge and resources to ensure you get the most competitive rates available.

Contact EB Mortgage today to apply online and get pre-approved!  

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EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today! 

Written by the Digital Marketing Team at Creative Programs & Systems: https://www.cpsmi.com/.