Commercial real estate loan (CRE loan)
A loan secured by commercial property, such as apartments, offices, stores or warehouses, often repaid from the property's rental income.
What a commercial real estate loan is
A commercial real estate (CRE) loan finances property used for business or investment, such as multifamily, office, retail or industrial buildings. The property secures the loan. Lenders size it on the property's income, using measures such as DSCR, and on its value.
How it works
The lender reviews the property's rent roll, expenses and value, plus the borrower's experience and finances. Loans often amortize over a longer period than their term, so a balloon payment is due at maturity. Banks and private credit funds both make CRE loans.
- 01 · UNDERWRITE The lender reviews income, expenses, value and the borrower's track record.
- 02 · CLOSE The loan closes with a mortgage on the property, and funds are released.
- 03 · SERVICE The borrower makes payments, and the lender monitors the property and covenants.
| Loan category | Supervisory LTV limit | Covers |
|---|---|---|
| Raw land | 65% | Undeveloped land |
| Land development | 75% | Land being prepared for building |
| Commercial construction | 80% | Multifamily and nonresidential projects |
| Improved property | 85% | Completed buildings |
These federal guidelines apply to banks, which set internal limits at or below them, with limited exceptions allowed.
When businesses use it
- Investors buying apartment, retail, office or industrial buildings
- Owners refinancing existing debt or taking equity out of a property
- Businesses buying the building they operate from
- Developers moving from a construction loan to permanent financing
Cross River originates and services commercial real estate loans on investment properties, from multifamily and mixed-use to office, retail and industrial buildings. It lends in New York, New Jersey, Connecticut and parts of Pennsylvania. See commercial real estate lending at Cross River.