Waiting for Lower Rates Could Cost Multifamily Borrowers
Starting early creates more options.
The current market cycle requires being realistic about borrowing costs and refinancing expectations, both of which have shifted with recent rate volatility. At the same time, Mortgage Bankers Association figures indicate that approximately $757 billion of multifamily loans are coming due from 2026 through 2028, with nearly $300 billion maturing this year and another $223 billion expected next year. Debt capital remains available across a range of lenders, but allocations are selective. Waiting for lower rates can leave an owner with fewer options to address a proceeds shortfall.
Generating lender competition
Generating lender competition starts with understanding what the financing needs to accomplish. The good news is that we are seeing lenders return to their traditional lending strengths after the low-rate period before and during COVID, albeit with higher coupons, meaning a request built around a lender’s actual underwriting will get further than one sent broadly in search of the lowest rate.
Maximizing proceeds, obtaining non-recourse debt, preserving prepayment flexibility or locking the rate early can each lead to a different group of lenders. Agencies and life companies generally favor stabilized performance and conservative leverage. Debt funds and bridge lenders need realistic business plans and a clear exit at maturity. Banks look closely at sponsor experience, balance sheet strength and often a depository relationship. The lowest quoted rate does little good if the lender cannot deliver the proceeds, structure or timing a borrower needs.
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Property performance and refinance proceeds
Earlier this year, the majority of both the borrower and lender field expected rates to keep declining. However, recent volatility has made that a difficult assumption to build a refinance around. Performing loans sized in a much lower rate climate are now coming due at materially higher borrowing costs and, while property NOI may have tracked inflation, a borrower may still need to bring cash to a refinance. Higher debt service can outweigh rent growth and amortization, as rising insurance, taxes and other operating expenses are constraining proceeds. Where recent history leads to a refined proforma is that lenders may underwrite rents, concessions, vacancy and expenses differently from the owner. Identifying that gap early gives an owner time to compare structures, contribute equity or discuss an extension before maturity becomes urgent.
Starting early creates options
Starting 12 to 18 months before maturity gives an owner time to review the rent roll, operating statements and existing loan terms, establish realistic proceeds and identify any equity requirement. Comparing amortization schedules, interest-only periods and lender underwriting approaches can reveal meaningful differences in both proceeds and cash flow. Interest-only payments, for example, may improve cash flow without increasing proceeds if the lender still sizes the loan using amortizing debt service.
The benchmark index is only part of the final borrowing rate. Treasury yields can fall while lender spreads widen, offsetting the decline and potentially leaving the final rate higher. A favorable move in the bond market is a reason to refresh lender quotes—not an assurance that borrowing costs have improved.
Some lenders allow borrowers to lock the rate well ahead of closing, typically up to six months before funding. For an owner whose prepayment penalty expires in several months, a forward commitment can secure attractive terms while preserving the planned closing date. Before committing, confirm the required diligence, deposit, forward pricing and commitment terms. Starting early means being ready to act when the terms work; it does not require committing immediately.
Matching the lender to the financing need
The agencies remain a major source of multifamily financing, particularly where property performance and affordability align with their programs. Loan size, leverage and underwriting requirements affect competitiveness, and smaller loans may have fewer options. Rate-lock timing and interest-only terms vary by program. Confirm how the loan will be sized and what must be completed before the rate can be locked.
Insurance companies continue to compete on spread for fixed-rate, permanent loans, with many offering rate locks at application and a streamlined underwriting process. Some also offer forward commitments months ahead of closing at little to no premium in rate, allowing an owner to line up a refinance with their maturity or close immediately after a prepayment period ends. Their underwriting remains relatively conservative and select Life Company lenders will consider assets approaching stabilization. Interest-only terms vary, and many still underwrite to amortizing debt service. Certainty of close, aggressive pricing, and personalized servicing and loan documents are their meaningful advantages.
CMBS can deliver non-recourse financing and higher proceeds. Depending on the transaction, interest-only structures and different debt service requirements may support more proceeds than other permanent lenders. Pricing and proceeds remain exposed to market movement until the loan is priced or locked, and investor demand can affect execution. The additional proceeds need to justify that uncertainty, prepayment restrictions and limits on servicing flexibility.
Banks remain a trusted relationship for borrowers and should not be overlooked. Recourse can make them competitive where sponsorship brings experience, liquidity and a strong balance sheet. Banks and credit unions may also offer more flexible prepayment terms or individualized underwriting. A lower coupon can lose its appeal once depository requirements and ongoing covenants are factored in, particularly when an owner plans a sale or other capital event.
Debt funds finance assets still in transition or provide special built financing programs. Overall, though, they are focused bridge lenders that typically are best fit for providing time to complete lease-up, finish improvements or establish the operating history needed for permanent debt. Their higher transactional cost, reserves and repayment requirements need to be measured against a realistic exit. The business plan must remain workable if stabilization takes longer or rates do not decline.
Means to an end
Some borrowers are better served by keeping their existing low-cost debt, waiting for a prepayment penalty to decline or negotiating an extension. For an owner seeking cash out, the additional proceeds need to justify giving up that debt and paying the costs of refinancing. The maturity date and available liquidity determine how much room there is to wait. Borrowers cannot control rates at maturity. They can, however, determine now whether a refinance works at current terms and what they will do if it does not.
Charlie Kokernak is a director for Gantry.
Please note: To become a Viewpoint writer, reach out to Therese Fitzgerald at therese.fitzgerald@cpe-mhn.com. All Viewpoints are copyright of Multi-Housing News 2026. We do not accept AI-written content.
