Interest-only CMBS loans
By Brad Beattie, Director, Capital Markets, Janover Capital LLC · Published
An interest-only CMBS loan pays only interest, so the full balance is due at maturity. It is the norm: of loans securitized from October 19, 2025 to October 19, 2026, 82% paid interest only for the whole term and 4% for part of it. The trade is a lower payment now for a bigger refinancing at the end.
How common interest-only is, by property type
| Property type | Loans | Full-term interest only | Median LTV | Median DSCR |
|---|---|---|---|---|
| Mobile home park | 82 | 96% | 63.7% | 1.39x |
| Multifamily | 292 | 95% | 67.3% | 1.33x |
| Mixed use | 66 | 89% | 62.5% | 1.42x |
| Industrial | 64 | 86% | 63.5% | 1.49x |
| Retail | 141 | 85% | 62.7% | 1.61x |
| Office | 87 | 82% | 59.6% | 1.84x |
| Self-storage | 115 | 78% | 60.6% | 1.57x |
| Hotel | 96 | 67% | 61.1% | 1.77x |
| Co-op housing | 89 | 27% | 10.3% | 6.93x |
| All types | 1047 | 82% | 62.5% | 1.53x |
Loans securitized into public CMBS trusts from October 19, 2025 to October 19, 2026, from SEC Form ABS-EE filings. Full-term interest only means the interest-only period is at least the loan term. DSCR is net cash flow over the reported annual payment. Methodology.
Co-op housing is the exception: co-op corporations borrow little against their buildings and more often amortize. For income property, interest only is the default offer, and amortization is something you ask for.
What interest only does to your payment and your balloon
Example: a $10M loan at 6.40%, the median note rate on CMBS loans securitized in the last 12 months (rate data).
| Interest only | 30-year amortization | |
|---|---|---|
| Annual debt service | $640,000 | $750,607 |
| Balance due after 5 years | $10M | $9.35M |
| Balance due after 10 years | $10M | $8.46M |
Interest only frees about $110,607 a year of cash flow and multiplies the coverage ratio by 1.17. Over five years, amortization would have retired only $649,743 of principal, which is why lenders and borrowers both accept interest only on five-year loans: the balloon is nearly as large either way. Over ten years the gap is wider. Run your own case in the CMBS loan calculator.
Why lenders offer it
- Debt yield sizes the loan. Debt yield is income over loan amount, with no payment in it, so amortizing does not change how much the lender will lend. Debt yield.
- Coverage looks better. On an interest-only payment the coverage ratio is higher, which supports more proceeds where coverage binds. DSCR.
- Short terms. On a five-year loan, amortization barely moves the balloon, as the table above shows.
One regulatory footnote: a loan with interest-only payments cannot be a "qualifying CRE loan" exempt from credit risk retention, because that exemption requires level payments that fully amortize over no more than 25 years (30 for multifamily) and a term of at least ten years (17 CFR 246.17). In practice conduit pools retain risk on the whole pool anyway. CMBS risk retention.
How lenders underwrite interest-only loans
Full-term interest-only loans are tested on the interest-only payment. Partial interest-only loans are tested on the payment that starts after the interest-only period: the BANK5 2025-5YR14 prospectus says that for those loans the debt service and coverage figures "reflect a calculation of the future (larger) amortizing loan payment" (p. 294). In that pool, 21 of 25 loans (86.9% by balance) were interest only for the full term, at a weighted average 1.64x coverage and 61.6% loan-to-value; the 3 amortizing loans averaged 1.44x and 57.1% at cut-off, falling to 53.8% at maturity (pool table "Mortgage Loans by Amortization Type"). Agency lenders take a stricter line on multifamily: Freddie Mac computes coverage on an amortizing payment even for interest-only loans and caps full-term interest-only leverage at 65% to 70% (Conventional Small term sheet).
The risk is at maturity
With nothing paid down, the loan has to be refinanced or repaid at its original size. If values or rates have moved against you, the new loan may be smaller than the old one and the gap has to come from equity, a partner or a sale. Test that now with the CMBS refinance calculator, see how many loans face the same problem on the CMBS maturity wall, and start early: what to do when a CMBS loan is maturing. If the date passes without a payoff, the loan moves to the special servicer; missed maturity: the 120-day rule.
When to ask for amortization
- You plan to hold past maturity and want a smaller balance to refinance.
- The property type is volatile (hotel) or faces a big lease rollover before maturity.
- You want a lower maturity loan-to-value to protect against a weaker market at refinance.
A middle path is partial interest only: interest only for the first years, then amortizing. Compare offers with different structures in the loan offer comparison tool. All loan terms: CMBS loan terms.
Sources: SEC Form ABS-EE asset-level data as of 2026-10-28; BANK5 2025-5YR14 prospectus (424B2, filed April 2, 2025), pp. 221 and 294 and the "Mortgage Loans by Amortization Type" table; 17 CFR part 246, section 246.17; Freddie Mac Optigo Conventional Small term sheet (4/26).
Questions people ask
Are most CMBS loans interest only?
Yes. Of loans securitized into public CMBS trusts from October 19, 2025 to October 19, 2026, 82% paid interest only for the full term and 4% for part of the term. Fully amortizing CMBS loans are rare.
What happens when an interest-only CMBS loan matures?
The entire original balance is due on the maturity date. The borrower refinances, sells, or pays it off. If none of those happens, the loan is in maturity default and moves to the special servicer unless a signed refinancing commitment or sale contract is in hand.
Can I pay down principal on an interest-only CMBS loan?
Usually not during the lockout. Conduit loans generally prohibit voluntary principal prepayments until defeasance or yield maintenance is allowed, and a partial paydown costs the same kind of premium as a full one. Check the prepayment section of your loan agreement.
Do interest-only CMBS loans need stronger numbers?
Lenders size them to debt yield and to coverage on the interest-only payment, and many hold leverage lower than they would on an amortizing loan because nothing pays the balance down. A partial interest-only loan is usually tested on the later, larger amortizing payment.
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