Thinking about refinancing your commercial property in early 2026? It's a big decision, and honestly, the market can feel a bit wild. Rates have been up and down, and figuring out the best move for your business can be tricky. This guide is here to help break down what you need to know about commercial mortgage refinance rates and the whole process. We'll cover the current situation, what factors are at play, and how to get the best deal possible for your property.

Key Takeaways

• Commercial mortgage refinance rates in January 2026 are influenced by market indices like Treasury rates and SOFR, which are still adjusting after recent Fed actions. Expect rates to trend downwards as market conditions soften.
• Refinancing a commercial mortgage might require more cash upfront due to higher current rates compared to loans from 5-10 years ago. Borrowers may need to inject equity or find partners if the new loan doesn't cover the old one.
• Lenders favor certain property types like apartments and investment-grade retail, warehouse, or industrial properties with long leases due to lower risk. General office properties are less favored because of ongoing remote work trends.
• Key financial metrics like Debt Service Coverage Ratio (DSCR) and Loan-to-Value (LTV) are critical. Lower LTV and higher DSCR generally lead to better commercial mortgage refinance rates.
• Working with an experienced commercial mortgage broker can streamline the refinancing process by providing access to a wide range of lenders and helping negotiate the best terms.

Understanding Commercial Mortgage Refinance Rates in January 2026

Current Market Conditions for Commercial Mortgage Refinance Rates

As of January 10, 2026, commercial mortgage rates are showing signs of stabilization after a period of fluctuation. The benchmark 5-year Treasury rate is sitting at 3.757%, with the 10-year Treasury at 4.171%. These figures are important because most commercial mortgages are priced based on these longer-term Treasury yields, not the short-term prime rate. While the Federal Reserve made several rate cuts in late 2024, signaling a move away from aggressive inflation control, long-term rates haven't dropped as steeply. This means that while borrowing costs have eased from their peak, they remain higher than in previous years. Many borrowers are opting for shorter loan terms with lower prepayment penalties to maintain flexibility. This strategy allows them to potentially refinance again if rates continue to soften. Some housing economists anticipate 30-year mortgage rates falling below 6% in 2026, but others foresee persistent inflation that could keep rates from declining significantly. It's a mixed bag out there, so staying informed is key.

Factors Influencing Commercial Mortgage Refinance Rates

Several things play a role in what rate you'll actually get. First off, the type of property matters a lot. Apartment buildings and well-located industrial or retail spaces with long-term leases tend to get better rates than, say, a general office building struggling with remote work trends. Lenders also look closely at your deal's metrics. This includes the Loan-to-Value (LTV) ratio – how much you're borrowing compared to the property's worth – and the Debt Service Coverage Ratio (DSCR), which shows if the property's income can cover the loan payments. A lower LTV and a higher DSCR generally mean a lower rate because it's less risky for the lender. Your own financial standing is also a big deal. Lenders check your credit history, net worth, and how much cash you have readily available. Experienced borrowers with a solid financial background usually get the best pricing. Location is another factor; prime urban and suburban markets are often favored over rural areas.

Projected Trends for Commercial Mortgage Refinance Rates

Looking ahead, the general sentiment is that rates will likely continue to ease, but perhaps not dramatically. The Federal Reserve's actions in 2024 have set a more accommodative tone, and further cuts are possible, though the pace might slow. This should, in theory, put downward pressure on commercial mortgage rates over time. However, concerns about inflation persist, which could temper the decline in long-term Treasury yields. We might see a scenario where rates gradually soften, making refinancing more attractive throughout 2026. Borrowers who are looking to refinance might find it beneficial to time their applications carefully, perhaps waiting for specific economic indicators to align. It's a good idea to keep an eye on economic forecasts and lender announcements.

The commercial real estate market is dynamic. While interest rate movements are a major driver, property type, location, and borrower strength all contribute significantly to the final refinance rate. Understanding these interconnected factors is key to securing favorable terms.

Navigating the Refinancing Process for Commercial Mortgages

Key Steps in Refinancing a Commercial Mortgage

Refinancing a commercial mortgage might seem like a big undertaking, but breaking it down into steps makes it much more manageable. It's all about making sure the new loan fits your property's needs and your financial goals. Think about why you're refinancing in the first place – maybe you want a lower interest rate, a shorter loan term, or to pull out some cash for other investments.

Here’s a general rundown of what to expect:

1. Assess Your Goals: Before anything else, get clear on what you want to achieve. Are you looking to reduce monthly payments, pay off the loan faster, or access equity? Your goals will shape the entire process.
2. Review Current Market Conditions: Take a look at what interest rates are doing. As of January 2026, rates are still higher than they were a few years back, which can make refinancing a bit tricky. Some loans might not generate enough cash to cover the payoff of the old loan, meaning you might need to bring extra cash to the table or find an equity partner.
3. Gather Property and Financial Documents: Lenders will need a clear picture of your property's performance and your own financial standing. This usually includes things like rent rolls, operating statements, and your personal financial statements.
4. Shop for Lenders: Don't just go with the first lender you talk to. Different lenders have different appetites for risk and offer varying terms. Comparing offers is key to getting the best deal.
5. Underwriting and Appraisal: The lender will review all your documents and likely order an appraisal of your property to determine its current market value.
6. Loan Approval and Closing: Once everything checks out, you'll get a loan commitment. After that, it's a matter of finalizing the paperwork and closing the deal.

It's important to remember that higher interest rates in early 2026 mean that mortgage payments can rise faster than rental income increases. This can make it tough for some property owners to refinance without putting in more capital or finding new investors.

Essential Documentation for Commercial Mortgage Applications

When you apply to refinance your commercial mortgage, lenders need a solid understanding of both your property and your financial health. They want to see that the property is a sound investment and that you're a reliable borrower. Having these documents ready can speed up the process considerably.

Here’s a list of common documents you'll likely need:

• Property Financials: This includes historical operating statements (usually for the past 2-3 years), current rent rolls detailing tenants, lease terms, and rental income, and a current property appraisal.
• Borrower Financials: Lenders will want to see your personal financial statements, including net worth statements, liquidity statements (how much cash you have readily available), and your personal credit reports. For business entities, they'll want business financial statements and tax returns.
• Property Details: Information about the property itself, such as its physical address, square footage, zoning, and any environmental reports or surveys.
• The "Why": A clear explanation of why you are refinancing and how you plan to use the proceeds from the new loan.

The Role of a Commercial Mortgage Broker

Working with a commercial mortgage broker can really make a difference when you're trying to refinance. These professionals act as a go-between, connecting borrowers with various lenders. They have a broad network and a deep understanding of the market, which can be incredibly helpful, especially in a shifting rate environment like we're seeing in early 2026.

A broker's main job is to find the best possible loan terms for you. They do this by:

• Accessing a Wide Lender Network: Brokers work with a diverse group of lenders, including banks, credit unions, insurance companies, CMBS lenders, and private debt funds. This gives you access to more options than you might find on your own.
• Packaging Your Deal: They help prepare your loan application, making sure it's presented professionally and highlights the strengths of your property and your financial situation. This can make your application stand out to lenders.
• Negotiating Terms: Brokers are skilled negotiators. They can work to get you the most favorable interest rate, loan-to-value ratio, and other loan terms possible, saving you money in the long run.

Using a broker can streamline the entire refinancing process, saving you time and potentially securing better financing terms. They understand the nuances of different lender requirements and can guide you toward the most suitable capital sources for your specific deal.

Evaluating Property Types for Commercial Mortgage Refinancing

When you're looking to refinance a commercial mortgage, the type of property you own really matters. Lenders look at different kinds of buildings with a keen eye, and some are definitely more popular than others right now. It’s not just about the building itself, but also where it is and who’s renting space.

Preferred Asset Classes for Refinancing

Right now, lenders are showing a lot of love for properties that have a history of being full and are in good neighborhoods. Think apartment buildings – people always need a place to live, so these tend to be stable. Also, industrial and warehouse spaces are doing well, especially if they have long-term leases with solid companies. Retail properties can also be a good bet, but only if they're in strong locations and have tenants that are doing well. These types of properties generally have lower risk profiles, which makes lenders feel more comfortable.

• Multifamily properties: Consistent demand, predictable income streams.
• Industrial/Warehouse: Growing e-commerce means these spaces are often in high demand.
• Investment-grade retail: Well-located centers with strong anchor tenants.

Properties Facing Refinancing Challenges

On the flip side, some property types are finding it tougher to get a good refinance deal. Office buildings, for example, are still a bit of a question mark. With so many people working from home, even part-time, the demand for office space isn't what it used to be. Properties with high vacancy rates or those in less desirable locations can also be a hard sell. Short-term leases can also be a red flag for lenders because they mean more uncertainty about future income.

• General office buildings: Impacted by remote work trends.
• Properties with high vacancy: Indicates potential issues with demand or management.
• Locations with declining economic activity: Can lead to lower tenant demand and rent growth.

Impact of Lease Terms and Occupancy on Refinance Eligibility

How long your tenants are signed up for and how much of your building is actually being used are huge factors. Lenders really like to see long leases, like 5, 7, or even 10 years, especially with strong, creditworthy tenants. This shows them that the income stream is pretty secure for a good while. High occupancy rates, meaning most of your building is rented out, are also a big plus. It means your property is in demand and generating good income. If you have a lot of short-term leases or a building that's mostly empty, you'll likely face higher rates or need to put more money down to refinance.

The stability of your property's income is a primary concern for lenders. Properties with a proven track record of high occupancy and long-term leases from reliable tenants are viewed much more favorably during the refinancing process. This predictability reduces the perceived risk for the lender, often translating into better loan terms and rates.

Here's a quick look at how lease terms and occupancy can affect your refinance:

Financial Metrics and Loan-to-Value in Commercial Refinancing

When you're looking to refinance a commercial mortgage, lenders really focus on a few key numbers. They want to see that the property is making enough money to cover the loan payments, and they also want to know how much the property is worth compared to how much you want to borrow. These two things, the Debt Service Coverage Ratio (DSCR) and the Loan-to-Value (LTV) ratio, are super important.

Understanding Debt Service Coverage Ratio (DSCR)

Basically, DSCR tells you if your property's income can handle the mortgage payments. It's calculated by dividing the property's net operating income (income after operating expenses but before debt service) by the total debt service (principal and interest payments).

• A DSCR of 1.0 means the income exactly covers the debt payments.
• Lenders usually want to see a DSCR of at least 1.20x, meaning the income is 20% more than what's needed for the loan payments.
• A higher DSCR shows the property is a safer bet for the lender, which can lead to better loan terms.

Assessing Loan-to-Value (LTV) Ratios for Refinances

LTV is pretty straightforward: it's the loan amount divided by the property's appraised value. This tells the lender how much risk they're taking on. If you owe more than the property is worth, that's a bad sign.

• For refinances, lenders often cap the LTV at 70% or 75%. This means you can borrow up to 70-75% of the property's value.
• Getting a higher LTV, say 80%, usually requires a stronger DSCR and might come with a slightly higher interest rate.
• If you need to pull out a lot of cash (a cash-out refinance), the LTV might be lower, or the rates could be a bit higher.

How Deal Metrics Affect Commercial Mortgage Refinance Rates

These metrics aren't just numbers on a page; they directly influence the interest rate you'll get. Lenders use them to price risk. A property with a strong DSCR and a lower LTV is less risky, so you'll likely get a better rate. Think of it like this:

When lenders look at a refinance application, they're essentially trying to predict the future. They use DSCR and LTV as indicators of how likely the borrower is to repay the loan, even if unexpected things happen with the property or the market. A solid financial picture makes them more comfortable offering a lower rate.

Here's a general idea of how pricing might look, though actual rates vary:

Keep in mind that these are just guidelines. The specific property type, market conditions, and your own financial history all play a part in the final rate you're offered. Understanding these metrics is your first step to securing favorable terms for your commercial mortgage refinance. For more on market conditions, check out commercial real estate fundamentals.

Exploring Loan Structures and Terms for Commercial Mortgages

Fixed vs. Floating Rate Options for Commercial Mortgages

When you're looking at refinancing your commercial property, one of the first big decisions you'll make is whether to go with a fixed or a floating interest rate. It's not a one-size-fits-all situation, and what works best really depends on your risk tolerance and what you think the market will do.

• Fixed Rate: This is pretty straightforward. Your interest rate stays the same for the entire loan term, or at least for a set period within the term (like 5, 7, or 10 years). This gives you predictability. You know exactly what your principal and interest payment will be each month, which makes budgeting a lot easier. It's a good choice if you prefer stability and want to lock in a rate you feel is favorable, especially if you think rates might go up.
• Floating Rate: Also known as an adjustable-rate mortgage (ARM), this type of loan has an interest rate that can change over the life of the loan. It's usually tied to a benchmark index, like SOFR. If the index goes up, your rate and your payments go up. If it goes down, your payments could decrease. Floating rates often start lower than fixed rates, which can be attractive. However, they come with the risk of rising payments if market rates increase.

Choosing between fixed and floating rates is a balancing act between certainty and potential savings.

Prepayment Penalties and Their Impact on Refinancing

Commercial mortgages often come with prepayment penalties, which can significantly affect your refinancing plans. These penalties are essentially fees charged by the lender if you pay off the loan early, including when you refinance. They are designed to protect the lender's expected return over the loan's life.

There are a few common types:

• Yield Maintenance: This is often the most complex and can be the most expensive. It requires you to pay the lender the amount needed to compensate them for the interest they would have earned if the loan had continued to its original maturity date, considering current interest rates. If rates have fallen since you took out the loan, this penalty can be quite high.
• Defeasance: Similar to yield maintenance, but instead of paying cash, you provide the lender with a portfolio of U.S. Treasury securities that will generate enough income to cover the remaining loan payments. This can be a more involved process.
• Step-Down: These penalties decrease over time. For example, you might have a 5% penalty in the first few years, which drops to 4% in the next few years, and so on, until it eventually disappears. This is generally more borrower-friendly than yield maintenance.
• Fixed Percentage: A straightforward percentage of the outstanding loan balance, often around 1-2%. This is simpler to calculate but can still be a substantial amount.

When considering a refinance, you absolutely need to know what your prepayment penalty looks like. Sometimes, the cost of paying the penalty outweighs the benefits of refinancing, especially if the rate savings aren't huge.

Interest-Only Loan Availability for Commercial Properties

Interest-only (IO) loans are another structure that can be available for commercial properties, and they've become a bit more common again. With an interest-only loan, for a specified period at the beginning of the loan term, your payments only cover the interest charged on the principal balance. The principal amount you borrowed doesn't decrease during this period.

Here's a quick rundown:

• How it works: For example, you might have a 10-year interest-only period followed by a 20-year amortization period. During the first 10 years, your monthly payment is lower because it doesn't include any principal repayment.
• Benefits: The primary advantage is lower initial cash flow requirements. This can be helpful if you're acquiring a property that needs some work, or if you anticipate significant income growth in the near future and want to free up capital for other investments or property improvements.
• Considerations: After the interest-only period ends, your payments will increase significantly because you'll then need to pay back both the principal and interest over the remaining term. You need to be confident that the property's income will be sufficient to handle these higher payments later on. Also, lenders might require a higher down payment or stricter debt service coverage ratios for IO loans compared to fully amortizing loans.

Lenders look at interest-only loans as a bit riskier because the borrower isn't building equity through principal reduction early on. This means the loan balance stays higher for longer, and the lender's exposure is greater. Therefore, qualifying for an interest-only period often depends heavily on the property's strong cash flow and the borrower's financial strength.

Strategies for Securing Favorable Commercial Mortgage Refinance Rates

Getting the best possible rate when you refinance your commercial mortgage isn't just about luck; it's about being smart and prepared. With rates hovering around 5.17% as of January 10th, 2026, it's a good time to think about how to get the most bang for your buck. It really comes down to a few key areas: making yourself look good to lenders, knowing how to talk to them, and picking the right moment to ask.

Optimizing Borrower Profile for Better Rates

Lenders want to see that you're a safe bet. This means having a solid financial history and a property that makes sense. They'll look at your credit score, your net worth, and how much cash you have on hand. But it's not just about you; it's about the property too. Properties that have been consistently rented out, especially apartments or industrial spaces with long-term tenants, tend to get better terms. Think about it: if a property is already bringing in steady income, the lender feels more secure.

• Strong Credit Score: Aim for the highest score you can manage. This is a big indicator of your reliability.
• Healthy Net Worth and Liquidity: Lenders want to know you have reserves, both personally and for the property.
• Property Performance: Consistent occupancy and rental income are huge pluses.
• Asset Class: Properties like apartments, well-located retail, or industrial buildings with stable leases are generally favored.

Negotiating Terms with Lenders

Once you've got your ducks in a row, it's time to talk turkey. Don't just accept the first offer you get. A good commercial mortgage broker can be a real asset here, having relationships with various lenders and knowing what's standard. They can help package your deal in the best light and shop it around. Remember, lenders are competing for good business, so there's often room for negotiation on rates, fees, and even loan terms.

Be prepared to present a clear picture of your property's financial health and your own stability. Having multiple offers from different lenders can give you significant negotiating power.

Timing Your Refinance for Optimal Market Conditions

This is a big one. Market conditions change, and so do interest rates. While rates are currently around 5.17%, they can move. If you don't absolutely need to refinance right now, it might be worth waiting for rates to dip further. Many borrowers are opting for shorter-term loans with lower prepayment penalties so they can refinance again later if rates improve. Watching economic indicators and Federal Reserve announcements can give you a heads-up on potential rate shifts.

Wrapping It Up

So, looking at January 2026 for commercial mortgage refinancing, it seems like things are still a bit up in the air. While the Fed has made some moves, those long-term rates that really matter for commercial loans haven't dropped as much as some hoped. This means you might still need to bring more cash to the table than you did a few years back, or maybe look at shorter loan terms to give yourself options later. It’s not the easiest time to refinance, for sure. But, if you’ve got a solid property in a good spot, especially apartments or warehouses, you’ve got a better shot. Keep an eye on those Treasury rates, and if you’re unsure, talking to a mortgage broker who knows the market inside and out is probably a smart move. Things could get better as the year goes on, but for now, be prepared and do your homework.

Frequently Asked Questions

What are commercial mortgage rates like in January 2026?

In early 2026, commercial mortgage rates are starting around 5.17%. These rates are influenced by big market rates like the 5-year Treasury (around 3.757%) and the 10-year Treasury (around 4.171%). Rates have been higher because the Federal Reserve raised them to control rising prices, but they are expected to slowly go down.

How do I get a commercial mortgage?

To apply for a commercial mortgage, you'll need to give the lender important papers about your finances. This includes things like a list of your property's tenants and how much money it makes, as well as your personal financial details like your credit score and how much money you have. The lender checks both your property and your background to decide if they can give you a loan and what the price will be.

What kind of properties are best for refinancing commercial mortgages?

The best properties for refinancing are usually ones that are in good areas and have been rented out most of the time. Think apartment buildings, or stores, warehouses, and factories that have long-term rental agreements. These are seen as safer bets. Properties with empty spaces or short rental agreements, or those in remote places, are seen as riskier. Regular office buildings are less popular because many people are still working from home.

How much money do I need to put down for a commercial property?

It used to be common to borrow up to 80% of the property's value when interest rates were low. But now, with higher rates, it's harder for the property's income to cover the loan payments. So, lenders often only allow you to borrow about 65% to 70% of the property's value. This means you'll likely need to put down a larger amount, maybe 30% to 35%.

What happens if my commercial mortgage is due soon and rates are high?

If your loan is due and rates are higher than when you first got the loan, you might have a problem. The new loan might not be big enough to pay off your old loan, meaning you'll have to pay extra cash. Also, your new monthly payments might be much higher than before, possibly more than the rent you collect. Some people choose shorter loan terms with fewer penalties so they can refinance again later when rates drop.

Why should I use a commercial mortgage broker?

A good mortgage broker knows many different lenders and can help you find the best deal for your situation. They have access to a wide network of banks, investment companies, and other lenders. They can look at your specific property and needs and figure out which lender is most likely to approve your loan and offer the best terms. They also handle a lot of the paperwork and negotiations for you.