CMBS vs bank loans

A CMBS loan is non-recourse, fixed rate and sized to the property, but rigid: prepayment runs through defeasance or yield maintenance, and a servicer handles everything after closing. A bank loan usually carries a personal guarantee and financial covenants and often floats or resets, but stays with a lender you can call. Choose CMBS for proceeds and non-recourse terms, a bank for flexibility.

Side by side

	CMBS (conduit) loan	Bank loan
Recourse	Non-recourse, with bad-act carve-outs	Often a full or partial personal guarantee
Leverage	Lowest of LTV, DSCR and debt yield limits; disclosed guidelines up to 80% LTV and 1.20x DSCR	Bank’s own policy, within a supervisory ceiling of 85% for improved property
Rate	Fixed for the term	Floating, fixed, or fixed through a swap
Term	Usually 5 or 10 years	Commonly shorter, with renewals at the bank’s option
Amortization	Mostly interest only	Usually amortizing
Prepayment	Lockout, then defeasance or yield maintenance; open period at the end	Often a step-down fee, swap breakage, or none
Covenants	Few financial covenants; cash management triggers instead	Coverage, leverage and often global cash flow or deposit covenants
Borrower	Single-purpose entity	Any entity; sometimes the operating company
After closing	Master servicer, then special servicer if trouble	The bank’s relationship manager
Modifications	Limited by REMIC rules and the servicing agreement	Negotiated with the bank
Closing costs	Higher: lender legal, full third-party reports	Lower, though appraisal and environmental review still apply
Property types	Broad, including hotel and self-storage	Depends on the bank’s appetite and concentration

Sources for the leverage row: lenders’ underwriting standards in the BANK5 2025-5YR14 prospectus, pp. 254, 268 and 294; supervisory limits in the Interagency Guidelines for Real Estate Lending Policies, 12 CFR part 365, Appendix A. What recent CMBS loans actually got: CMBS loan requirements.

Recourse: the biggest difference

A CMBS lender looks to the property. The borrower is a single-purpose entity, and a guarantor signs only for specific bad acts: fraud, misapplication of funds, a voluntary bankruptcy filing, unpermitted transfers and similar carve-outs. Non-recourse CMBS loans lists them.

A bank decides recourse by policy. The interagency guidelines that govern bank real estate lending require each bank’s policy to address “limits on partial recourse or nonrecourse loans and requirements for guarantor support” and “minimum covenants for loan agreements” (12 CFR part 365, Appendix A). In practice many banks want a personal guarantee on investor commercial real estate, sometimes burning off as the loan seasons.

Leverage and sizing

Both lenders look at value and coverage. CMBS lenders add debt yield, which ignores the rate, and they size each loan to the smallest of the three. Banks set internal loan-to-value limits that cannot exceed the supervisory ceilings: 65% for raw land, 75% for land development, 80% for commercial construction, and 85% for improved property (12 CFR part 365, Appendix A). The ceiling is not the offer; most banks lend well below it on investor property. Run both cases in the CMBS loan calculator.

Why banks say no to good loans

A bank’s appetite depends on its own balance sheet. The 2006 interagency guidance on commercial real estate concentrations flags a bank whose construction and land loans reach 100% or more of total capital, or whose total commercial real estate loans reach 300% or more of capital with rapid growth, for heightened risk management (71 Fed. Reg., Dec. 12, 2006). The agencies said the guidance is not a cap, but banks near those levels often slow down. A CMBS lender sells the loan, so its appetite depends on bond investors instead. When local banks are full, CMBS is often the market that still quotes.

Prepayment and exit

Exit	CMBS loan	Bank loan
Sell in year 3	Defeasance or yield maintenance, or the buyer assumes the loan	Often a step-down fee or swap breakage; assumption is the bank’s call
Refinance early	Same as above	Usually simpler
Pay off at maturity	Free in the open period	Free at maturity

Estimate the CMBS cost with the defeasance calculator and yield maintenance calculator, or read CMBS prepayment penalties.

Living with the loan

A bank loan is a relationship. You call your banker for a consent, a waiver or an extension, and the bank decides. A CMBS loan is a contract. The master servicer applies the loan agreement and the pooling and servicing agreement, charges fees for consents, and sends anything significant to the special servicer or the controlling bondholder. CMBS servicer consent. In exchange, as long as you pay and comply, no one can call the loan or demand a paydown because the bank’s strategy changed.

Which to choose

CMBS tends to win when: you want non-recourse debt; the property is stabilized; you want the most proceeds at a fixed rate; you plan to hold for the full term; or the bank market is closed to your property type or market.

A bank tends to win when: you may sell or refinance early; the business plan needs flexibility (renovations, re-leasing); the loan is small; you value a relationship and deposits matter; or you are comfortable guaranteeing the loan.

Put a bank quote and a CMBS quote side by side in the loan offer comparison tool, and see current CMBS rates by property type on CMBS loan rates. Other comparisons: CMBS vs life company loans, CMBS vs agency loans, CMBS vs bridge loans.