Commercial Real Estate Loan Types, by Purpose and Stage.
Commercial real estate loan types differ in purpose, term, and structure. Each one fits a different stage of a property's life: a construction loan funds a build, a bridge loan carries one through a transition, and a permanent loan holds it.
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The right loan depends on the business plan, not only the rate. We compare proposals from banks, life insurance companies, agency lenders, CMBS lenders, and debt funds side by side. Mundial arranges debt only and does not arrange any equity.
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The six loan types below: Construction Loans, Bridge Loans, Bank and Life Company Loans, Agency Multifamily Loans, CMBS Loans, and Mezzanine Loans.
Construction Loans
Construction loans fund the cost of building or substantially renovating a property. Lenders advance funds in draws as work is completed, often with an interest reserve, a completion guarantee, and a contingency for cost overruns. Most are floating-rate and short-dated, repaid by a sale or a permanent loan once the project stabilizes. Lenders size them on loan-to-cost and weigh the sponsor's construction record.
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Bridge Loans
Bridge loans are short-term financing for properties in transition: a lease-up, a repositioning, a renovation, or an acquisition that has to close quickly. Debt funds and some banks underwrite the business plan rather than current income, so leverage can be higher and pricing reflects the added risk. Most are floating-rate with extension options, repaid by a sale or a permanent loan once the property stabilizes.
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Bank and Life Company Loans
Banks and life insurance companies lend on stabilized properties for longer terms. Banks often favor relationship borrowers and offer flexible structures, recourse options, and local market knowledge. Life companies often favor lower leverage, high-quality assets, and strong sponsors, and typically offer fixed rates for long terms. Both weigh debt service coverage, occupancy, and tenant credit before committing.
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Agency Multifamily Loans
Agency loans finance apartment properties of five or more units through the Fannie Mae and Freddie Mac programs. They are usually long-term, fixed or floating, and often non-recourse beyond standard carve-outs. Programs cover conventional, affordable, seniors, and student housing, plus small-balance loans. Underwriting centers on occupancy, debt service coverage, property condition, and the sponsor's experience.
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CMBS Loans
CMBS loans are pooled with other commercial mortgages and sold as commercial mortgage-backed securities. They are typically long-term, fixed-rate, and non-recourse, and they can fit property types or markets that banks avoid. In exchange, terms are standardized and prepayment is restricted through defeasance or yield maintenance, while a loan servicer, not the original lender, manages the loan for its full term.
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Mezzanine Loans
Mezzanine loans sit behind a first mortgage to increase total leverage. They are secured by a pledge of the ownership interests in the borrowing entity rather than by the property itself, so the lender can take control of the entity on a default. Pricing is higher than for senior debt, and the first mortgage lender must approve the structure through an intercreditor agreement before the mezzanine loan can close.
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