Commercial real estate loan terms, lender by lender.

The short answer

Commercial real estate loan terms depend more on the lender type than on the property. A bank or credit union usually lends on a shorter term with a balloon at maturity and some recourse to the sponsor. A life company or CMBS lender writes longer fixed-rate loans that are typically non-recourse apart from carve-outs, with yield maintenance or defeasance on prepayment. Agency and HUD loans run longest, and debt fund bridge loans are the shortest, with extension options instead.

Four terms decide how a loan behaves: the term (when it matures), the amortization (how payments are calculated), recourse (who is liable beyond the property) and prepayment (what it costs to pay early). The table in this post compares those four across eight lender types. Where a government program publishes the number, it is shown with the source. Where the number is set lender by lender, the table says so instead of guessing.

What is the difference between term and amortization?

The term is the life of the loan: the date on which the remaining balance is due. The amortization period is the schedule used to calculate the monthly payment, and it is often longer than the term. A loan with a 10-year term and a 30-year amortization schedule has payments sized as if it would be repaid over 30 years, and most of the principal is still owed when the 10 years end.

Interest-only periods change the picture again. During an interest-only period the borrower pays no principal, so the balance at maturity is higher. Lenders size the loan on coverage at the amortizing payment, so the same property supports different loan amounts depending on the schedule. The commercial real estate loan calculator shows how term, rate and amortization change the payment and the balance at maturity.

What is a balloon payment, and who carries one?

When the term is shorter than the amortization, the unpaid balance at maturity is a balloon payment. The borrower pays it by refinancing, selling the property or using cash. Most commercial loans from banks, credit unions, life companies, CMBS lenders and the agencies carry a balloon, which is why refinance risk is part of every credit memo.

The exception is HUD. The MAP Guide requires all HUD-insured mortgages to amortize through a level annuity monthly payment plan with equal monthly payments of principal and interest, and defines fully amortize as repaying the entire principal amount of the loan. A HUD loan has no balloon to refinance.

What are typical commercial loan terms by lender type?

The table compares the four terms that matter most. Numbers appear only where a primary program source publishes them, and the program documents themselves say terms can change, so confirm against the current version before quoting a borrower.

How do bank and credit union terms differ?

Banks and credit unions hold most of their commercial loans on balance sheet, so their terms reflect their own funding and credit policy. Shorter terms let them reprice, and recourse to the sponsor is a common part of the credit. Every one of those choices is set lender by lender, which is why a published average would mislead more than it informs.

Credit unions add a regulatory layer. NCUA's commercial lending rule in 12 CFR Part 723 requires a comprehensive written commercial loan policy approved by the board, covering underwriting standards, collateral evaluation and loan-to-value limits, approval authority and loan review. The rule does not set maturities, so terms come from each credit union's policy. A credit union buying a participation in another lender's loan must meet the same regulatory requirements as if it had originated the loan, under 12 CFR 701.22.

How do life company and CMBS terms compare?

Life companies and CMBS lenders both write long fixed-rate loans on stabilized property, and both price them to be held to maturity: the life company on its own balance sheet, the CMBS lender through a securitization trust. That shared goal produces similar terms: non-recourse apart from carve-outs, and prepayment protection through yield maintenance or defeasance that keeps the investor's yield whole if the borrower pays early.

The difference shows up after closing. A life company loan has one owner who can agree to a modification. A CMBS loan sits in a trust with a master servicer and a special servicer, and the pooling and servicing agreement governs what anyone can approve. Borrowers trade the life company's flexibility for the conduit's willingness to lend at higher leverage on a wider range of assets.

What terms do Fannie Mae and Freddie Mac offer?

Fannie Mae and Freddie Mac lend on multifamily through approved lenders, and their published term sheets are the most specific public source of commercial loan terms. Freddie Mac's Optigo Conventional Small term sheet, dated April 2026, lists 5, 7, 10, 12 or 15-year terms, a maximum 30-year amortization, and non-recourse except for standard carve-out provisions. Its standard prepayment provision is yield maintenance until securitized, followed by a two-year lockout and defeasance after that, with no prepayment premium in the final 90 days.

Fannie Mae's Multifamily Selling and Servicing Guide sets out the prepayment premium mechanics for its DUS loans, including yield maintenance premiums, graduated prepayment premiums on fixed-rate loans, and an open period near maturity when the loan can be repaid without a premium. Terms and amortization vary by DUS execution, so the table shows them as variable rather than quoting a broker summary.

What are HUD 223(f) loan terms?

HUD's Section 223(f) program insures loans for the purchase or refinance of existing multifamily properties. The MAP Guide sets the maximum mortgage term at 35 years or 75% of the remaining economic life of the property, whichever is less, and says the term may not be less than 10 years. The loan fully amortizes, and the note is non-recourse to the borrowing entity, though parties named in the firm commitment can be personally liable for losses from bad acts set out in the Regulatory Agreement.

Prepayment is restricted by statute. The National Housing Act prohibits prepayment of a 223(f) loan for five years from endorsement, with exceptions set out in the MAP Guide, such as an agreement with HUD to keep the property as rental housing for the rest of the five years. The trade for the longest term in the market is the longest closing process, which the post on the HUD paperwork problem covers.

What are SBA 504 loan terms?

SBA 504 loans finance owner-occupied real estate and other major fixed assets for small businesses. A certified development company provides the SBA-backed portion in partnership with a senior lender. The SBA's program page lists 10, 20 and 25-year maturities and long-term, fixed-rate financing, with the rate pegged to an increment above the current market rate on 10-year U.S. Treasury issues.

The senior lender's piece is a separate loan with its own terms, set by that lender. That means a 504 closing involves two sets of loan documents, two lenders and a CDC, all of whom need the same appraisal, environmental and title items. The SBA page also states the maximum 504 loan amount, though it gives two different figures in two places, so confirm the current limit with the CDC.

How do bridge loan terms and extension options work?

Debt fund bridge loans are short by design. They finance a property through lease-up or renovation, and the borrower plans to refinance into a permanent loan once the property stabilizes. The initial term is short, and an extension option lets the borrower add time if it meets conditions written into the loan agreement.

Those conditions are where bridge loans go wrong. A typical extension requires no default, a minimum debt yield or coverage, a new interest rate cap and an extension fee, each tested on a specific date. Missing the test date or the cap purchase can turn an extension into a maturity default. Track every extension condition with a due date from the day the loan closes.

What prepayment structures do commercial loans use?

A prepayment penalty protects the lender's expected return when a borrower pays early. The form depends on how the lender funds the loan.

• Yield maintenance

  The borrower pays the lender the present value of the interest it loses, calculated against a Treasury yield. Common with life companies, agencies and CMBS.
• Defeasance

  The borrower replaces the mortgage collateral with a portfolio of government securities that covers the remaining payments. Common in CMBS.
• Step-down

  A declining percentage of the balance, such as a schedule that falls each year. Common with banks and some agency executions.
• Lockout

  A period when prepayment is not allowed at all, such as the statutory five years on HUD 223(f) or the two years after a Freddie Mac securitization.
• Minimum interest

  A guaranteed amount of interest or spread the lender earns even if the loan pays off early. Common in bridge lending.
• Open period

  A window near maturity when the loan can be repaid without a premium.

Where do loan terms show up in the closing?

Terms start in the term sheet, become binding in the commitment and end up in the note and loan agreement. Every condition the terms create, from reserve deposits to rate cap delivery to extension tests, becomes an item someone has to track. The commercial loan closing process guide walks through how those items move from commitment to funding.

A loan origination system such as nCino records the approved terms. The closing itself still needs a shared list of conditions, owners and due dates, so the borrower, counsel and title can see what is outstanding. That is the gap a closing checklist fills, and the record it produces is what the servicer reads when the first extension or payoff request arrives.