Decisions, decisions — Options for minimizing exit costs from a CMBS loan
Abstract: Commercial mortgage-backed securities (CMBS) loans provide real estate investors access to a larger pool of financing at lower rates than they could qualify for on their own. But when buying a property that’s being financed with a CMBS loan, it’s important to consider the consequences of exiting the loan. This article explains the concepts of yield maintenance vs. defeasance and their role in CMBS loans, and shows how to craft the loan document. Careful forethought will be rewarded with greater flexibility and lower costs if the property is later sold or refinanced.