CMBS loan terms

A CMBS term sheet, line by line

Term	What it usually says	Where it lives at closing
Loan amount	The lowest of the loan-to-value, coverage and debt yield limits. Requirements	Loan agreement, promissory note
Interest rate	Fixed for the term; set at rate lock as a benchmark plus a spread	Promissory note
Term	Usually 5 or 10 years, ending in a balloon	Promissory note
Amortization	Interest only for all or part of the term, or a schedule up to 30 years	Promissory note, loan agreement
Interest accrual	Actual/360: interest for the actual days in each month on a 360-day year, so the effective annual rate is a little above the stated rate	Promissory note
Grace period	Often none before a missed payment is a default; late charges apply	Loan agreement
Prepayment	Lockout, then defeasance or yield maintenance, then a short open period	Loan agreement (prepayment and defeasance sections)
Recourse	Non-recourse, with carve-outs a guarantor signs for	Guaranty of recourse obligations, environmental indemnity
Borrower	A single-purpose entity owning only the property	Loan agreement (SPE covenants), organizational documents
Reserves	Taxes, insurance, replacement reserves; leasing reserves on commercial property	Loan agreement (reserve sections)
Cash management	A lockbox, hard or springing, with a cash sweep on triggers	Cash management agreement, deposit account control agreement
Transfers	Sale only by loan assumption with lender consent; some transfers pre-approved	Loan agreement (transfer section)
Other debt	No second mortgage; mezzanine allowed only if negotiated, with combined tests	Loan agreement, intercreditor agreement

Term length and rate

Term	Share of loans	Median rate	Middle half of rates
5 years	72%	6.46%	6.14% to 6.81%
10 years	28%	6.19%	5.96% to 6.55%
All	100%	6.40%	6.06% to 6.72%

Original note rates on loans securitized into public CMBS trusts from October 19, 2025 to October 19, 2026, from SEC Form ABS-EE filings. Not a quote. Live: CMBS loan rates.

Pick the term around your plan for the property, not the rate alone. A five-year loan matures sooner, into whatever market exists then; a ten-year loan carries a longer prepayment lock. If you might sell in year four, a five-year loan with a few open months before maturity costs less to exit than a ten-year loan you have to defease. Model the payoff with the defeasance calculator.

Amortization and interest-only periods

Interest only is the norm in conduit lending today: 82% of loans in the window paid interest only for the full term and another 4% for part of it. Lenders that amortize generally allow schedules up to 30 years (Bank of America's stated maximum in the BANK5 2025-5YR14 prospectus, p. 294). Interest only lowers the payment and raises coverage, but leaves the full balance due at maturity. Interest-only CMBS loans.

Prepayment: lockout, defeasance, yield maintenance, open period

Bond investors buy a CMBS pool for predictable cash flow, so the loan protects them from early payoff. The BANK5 2025-5YR14 pool is a typical mix (prospectus, p. 224):

• 19 of 25 loans (76.0% of the pool) were locked out, then allowed defeasance no earlier than two years after the bonds were issued.
• 2 loans (10.5%) were locked out, then allowed prepayment with the greater of yield maintenance or a prepayment premium.
• 2 loans (7.3%) allowed yield maintenance from the start; 2 more (6.2%) offered a choice of yield maintenance or defeasance after a lockout.
• Every loan had a free open period at the end: 4 to 7 payments, with 7 the most common (77.8% of the pool).

The two-year wait for defeasance is a tax rule, not a lender preference: a REMIC can release its lien for defeasance only if the substitute collateral is government securities and "the release is not within 2 years of the startup day" (26 CFR 1.860G-2(a)(8)). Costs in detail: CMBS prepayment penalties.

Reserves

Most loans collect reserves monthly or up front. In the BANK5 2025-5YR14 pool (prospectus, p. 229), 86.4% of the pool by balance had replacement reserves, 82.3% tax escrows, 53.5% insurance escrows, and 84.8% of the office, retail, industrial and mixed-use loans had reserves for tenant improvements and leasing commissions. Some loans let a strong sponsor post a guaranty instead of cash, or only start collecting after a trigger. CMBS reserves.

Cash management and lockboxes

The prospectus defines the lockbox types lenders use (pp. 230 to 231). In a hard lockbox, tenants pay straight into an account the servicer controls. In a soft lockbox, the borrower or manager collects rent and deposits it. A springing lockbox exists only after a trigger, typically an event of default or a coverage or debt yield test failing. After a trigger, cash pays debt service and reserves first, and the excess can be trapped as extra collateral until the trigger ends. How CMBS cash management works.

Selling, transferring and adding debt

A due-on-sale clause lets the lender accelerate the loan if the property or a controlling interest transfers without consent. Loans usually pre-approve estate planning, affiliate and minority-interest transfers (prospectus, p. 225). A buyer can take over the loan through an assumption, with servicer consent and an assumption fee set in the loan agreement. Second mortgages are prohibited; mezzanine debt is allowed only where the loan says so. In BANK5 2025-5YR14, The Spiral loan permits future mezzanine debt up to a combined 62.0% loan-to-value, 1.35x coverage and 8.1% debt yield (p. 233). Later capital: CMBS supplemental financing.

What you can negotiate before you sign

• The interest-only period and the amortization schedule.
• Reserves: upfront versus springing, caps on replacement and leasing reserves, a guaranty instead of cash.
• Cash management triggers: the coverage or debt yield level that starts a sweep and the test to end it.
• Prepayment: yield maintenance instead of defeasance, or a longer open period.
• Transfer provisions: pre-approved transferees, a one-time assumption right, the assumption fee.
• Carve-out guaranty scope: which acts trigger full recourse versus losses only. Non-recourse CMBS loans.

After closing, almost none of this can change without the servicer, and some changes need the controlling bondholder too. Negotiate at the term sheet. Compare two term sheets side by side with the loan offer comparison tool.

Sources: BANK5 2025-5YR14 prospectus (424B2, filed April 2, 2025), "Certain Terms of the Mortgage Loans", pp. 221 to 233, and Bank of America's underwriting standards, p. 294; 26 CFR 1.860G-2(a)(8); loan figures from SEC Form ABS-EE filings as of 2026-10-28.