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Commercial Financing and Prepayment Penalties on Commercial Mortgage Loans?

April 26, 2017Commercial financing mortgage loans penalties prepayment

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Commercial Financing and Prepayment Penalties on Commercial Mortgage Loans?

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Most commercial mortgage lenders making fixed rate commercial mortgage loans charge a prepayment penalty. The reason why is because the investors who buy commercial mortgage backed securities(CMBS) want a certain yield that is locked in. Why? Imagine you are a pension plan making actuarial projections to be sure you have enough money to pay your retirees. You need to know that you will earn a certain amount of interest. This is why you buy commercial mortgage backed securities.