CMBS vs agency loans

For stabilized apartments, Fannie Mae and Freddie Mac loans usually offer more leverage on an amortizing loan, longer terms and supplemental loans; CMBS offers full-term interest only, five- or ten-year terms, and a home for properties and sponsors the agencies decline. Agencies lend only on multifamily and related housing. CMBS lends on every major commercial property type.

Side by side

	CMBS (conduit) loan	Agency loan (Fannie Mae DUS, Freddie Mac Optigo)
Eligible property	All major commercial types	Multifamily and related housing only
Leverage	Lowest of LTV, DSCR and debt yield; recent medians on requirements	Freddie Conventional Small: 1.25x minimum amortizing DCR, 75% to 80% LTV amortizing
Interest only	Common for the full term	Allowed, at lower leverage (Freddie Conventional Small: 65% to 70% LTV full-term interest only)
Coverage tested on	The interest-only payment on a full-term interest-only loan; the amortizing payment otherwise	Freddie: an amortizing payment, even for interest-only loans
Term	Usually 5 or 10 years	Freddie Conventional Small: 5, 7, 10, 12 or 15 years
Amortization	Up to 30 years when it applies	Up to 30 years
Prepayment	Lockout, then defeasance or yield maintenance	Freddie standard: yield maintenance until securitized, then 2-year lockout, then defeasance; free in the final 90 days
Supplemental loan later	Rarely; only if the loan agreement allows mezzanine	Available, subject to the loan agreement (Freddie)
Recourse	Non-recourse with carve-outs	Non-recourse with standard carve-outs
Borrower	Single-purpose entity	Single-purpose entity
Documents	Each conduit lender’s form	Standard agency forms, “without modifications” for Freddie Conventional Small

Freddie Mac figures are from its Optigo Conventional Small term sheet (dated April 2026, loans generally $2 million to $10 million on properties of 5 to 50 units); other Freddie and Fannie products have their own parameters, and both agencies say terms change without notice. Fannie Mae’s requirements are set in its Multifamily Selling and Servicing Guide. CMBS guideline figures are from the BANK5 2025-5YR14 prospectus, pp. 254, 268 and 294.

Who can use which

Agencies finance residential rental housing through approved lenders: Fannie Mae’s Delegated Underwriting and Servicing (DUS) lenders and Freddie Mac’s Optigo lenders. Within multifamily they have product-level exclusions. Freddie’s Conventional Small term sheet, for example, excludes student, seniors, manufactured housing and cooperative properties from that product (other Freddie products cover some of them) and lists ineligible characteristics including master leases, ground leases, Delaware statutory trusts, scattered sites, co-living and septic or well water, and does not permit hard subordinate debt.

CMBS finances retail, office, industrial, hotels, self-storage, mixed use and mobile home parks as well as apartments, and it is often more open to features the agency box excludes. Multifamily is the largest single property type in recent conduit deals; see multifamily CMBS loans for current figures.

Leverage and interest only: the real decision

The agencies test coverage on an amortizing payment and cut leverage when you want interest only. A CMBS lender tests a full-term interest-only loan on the interest-only payment (partial interest-only loans are tested on the later amortizing payment). So for an apartment owner who wants full-term interest only, CMBS can produce more proceeds than an agency loan at the same coverage; for an owner happy to amortize, the agency often lends more.

Run the case both ways: the CMBS loan calculator for an interest-only CMBS loan, and an amortizing payment at the agency’s coverage and loan-to-value. Then compare the offers in the loan offer comparison tool.

Prepayment and later financing

Both structures protect investors from early payoff, in similar ways. Freddie’s standard Conventional Small structure is yield maintenance until the loan is securitized, then a two-year lockout, then defeasance, with no premium in the final 90 days; step-down and yield maintenance options cost extra. CMBS loans are typically locked out, then defeasable no earlier than two years after the trust’s startup (26 CFR 1.860G-2(a)(8)), with a short open period before maturity. CMBS prepayment penalties.

The bigger difference is supplemental financing. Freddie lists supplemental loans as available, subject to the loan agreement. A CMBS loan almost never allows a second mortgage; extra capital, if any, comes as mezzanine debt the loan agreement explicitly permits. For an owner who expects income to grow and wants to pull cash out mid-term, that can decide it. CMBS supplemental financing.

Which to choose

Agency tends to win when: the property is a stabilized, conventional apartment community within agency guidelines; you are comfortable amortizing; you want a longer term; or you want the option of a supplemental loan.

CMBS tends to win when: you want full-term interest only at higher leverage; the property has features the agency product excludes; the property is mixed use with significant commercial space; or the property is not housing at all.

Get both quotes when: the property is a stabilized apartment deal of a few million dollars or more. The answer often depends on interest only versus amortization and on prepayment flexibility, not on rate.

More comparisons: CMBS vs bank loans, CMBS vs life company loans, CMBS vs bridge loans.