Texas Commercial Mortgage Rates

At Select Commercial, we've built a solid reputation in the Texas commercial mortgage sector, offering tailored solutions for a variety of commercial properties across the state, with loans starting at $1,500,000. As experts in commercial real estate financing, we also understand the increasing demand for Texas apartment loans. Whether you're interested in multifamily units or exploring other commercial property options, our commercial mortgage rates page gives a detailed look at the best rates available across the 48 states.

Texas Commercial Mortgage Rates - updated 07/19/24

Loans Over $1,500,000 Get Free Quote
Loan Product Rate* LTV
Multifamily 5.41% Up to 80%
Commercial Real Estate Loan 6.43% Up to 75%
Single Tenant Lease 6.23% Up to 75%
Business Real Estate Loan 6.33% Up to 90%
*Rates start as low as the rates stated here. Your rate, LTV, and amortization will be determined by underwriting.

Texas Commercial Mortgage Benefits

TX commercial mortgage rates start as low as 5.41% (as of July 19th, 2024)
• A commercial mortgage broker with over 30 years of lending experience
• No upfront application or processing fees
• Simplified application process
• Up to 80% LTV on multi family , 75% on commercial (90% with SBA)
• Terms and amortizations up to 30 years
• Loans for purchase and refinance, including cash-out
• 24 hour written pre-approvals with no cost and no obligation

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Distress is currently low in the commercial real estate market. After Signature Bank and Silicon Valley Bank failed, there was widespread concern that other regional and local banks would fail due to the high levels of commercial real estate loans held in their portfolios. With the exception of some market sectors, most commercial mortgage portfolios have performed well. Usually, during times of market uncertainty, commercial real estate distress levels increase dramatically. Current levels of distress are low by historical standards. At the end of 2022, the level of commercial real estate assets under distress was only 1.2% of the total national sales volume. This number is important to watch as many loans face maturity and higher rates upon refinance in 2023.

MSCI, Inc. estimates the volume of loans maturing in 2023 at $400 billion. The Mortgage Bankers Association pegs the amount at over $700 billion. Many analysts predict that loan defaults will increase for two reasons: many of these maturing loans will need to be refinanced at higher rates (and may suffer cash flow problems) and there are fewer active lenders in the market due to the recent bank failures. Loan underwriting has tightened up as the result of global financial conditions and the average loan to value has been dropping on new originations. Many properties have been able keep pace with the market due to escalating rents and strong appreciation. Other properties, mainly in the office and retail sectors, have suffered due to higher vacancy factors and fixed long-term rental rates. Operating income growth has been strong in the multifamily and industrial markets, which represent about 35% of the maturities in 2023. Revenue growth in the office market has been flat for the past five years and vacancy rates have risen. This sector, which accounts for about 26% of 2023 maturities, is expected to see a significant increase in distress and defaults as many properties will not underwrite well enough to pay off existing loan balances.

In February 2023, Trepp Inc., a data analytics company, reported an increase of commercial mortgage-backed securities loans (CMBS loans) going into special servicing. They estimate the percentage of these loans at 5.2%. Many of these properties, including office buildings and retail centers, may be subject to distressed sales. In addition, many borrowers with adjustable-rate loans also face distress unless they hedged their risk with interest rate caps. These adjustable-rate borrowers are seeing current rates generate debt payments which exceed the net operating income of the property and an inability to raise rental rates to keep pace with the increases in debt service. Many of these borrowers will need to either sell the property in a distress sale or invest more capital into the property and refinance for lower loan amounts.

National, regional, and local banks hold more than half of the total amount of commercial real estate loans which will mature in 2023. So far, we have not seen distress levels high enough that would threaten the financial stability of these institutions. Most lenders are likely to extend impending maturity deadlines as opposed to foreclosing as foreclosure would cause losses. Many will employ other methods, including extensions and workouts, for the foreseeable future.

Most analysts agree that the problems encountered by Silicon Valley Bank and Signature Bank are not applicable to other small and local banks with commercial real estate portfolios. These two large bank failures were caused by much more specific situations. Silicon Valley Bank was too concentrated in the venture capital and technology sectors and did not diversify their lending. Signature Bank was too narrowly concentrated in the cryptocurrency sector, a market sector under intense scrutiny of federal regulators.

The commercial real estate market is very varied. There are many different sectors, geographic areas, and borrower types. Banks that lend to this market are able to diversify their risk by lending to a wide variety of borrowers and limiting their exposure to any one particular area or property type. Lenders who employ diversified lending practices and have conservative underwriting guidelines are likely to experience little or no distress or financial losses during this current market cycle.

Some commercial mortgage lenders lock rates at application, some lenders lock rates at commitment, while others lock rates prior to closing. We are currently in the midst of an increasing rate environment. Rates quoted at application may increase dramatically during the loan application progress, if not locked. It is very important to understand your lender’s procedure upfront to avoid potential confusion.

In order for a commercial mortgage lender to issue a firm loan approval, they will want to understand the financial condition of the borrower, as well as the fundamentals of the property. The borrower will be expected to supply his personal financial statement showing total net worth and liquidity. He will also need to provide a schedule of real estate owned demonstrating experience managing similar properties. Lastly, the borrower’s credit scores will needed. For the subject property, lenders will look closely at the current rent roll, operating statements showing income and expenses, copies of all leases, and other pertinent property information.

Commercial mortgage rates are determined by many different factors, including property type, location of the property, loan-to-value ratio, debt service coverage ratio, debt yield, borrower’s net worth, liquidity, credit rating and level of experience. Commercial mortgage lenders look at all of these factors to determine the riskiness of the loan before setting rates. Loans with the lowest risk profile will get the best commercial mortgage rates. As the potential risk increases, commercial mortgage rates usually increase.

Commercial mortgage loans are viewed differently by lenders than residential loans. Home loan lenders look strictly at the borrower’s income and credit in order to qualify. Commercial mortgage lenders look at the subject property’s rent roll, operating statements, and other factors to determine the cash flow or net income potential. Very strong (low risk) commercial mortgage loans might be priced lower than home loans, while weaker performing properties (higher risk) might be priced higher.

Most commercial mortgage loans today are fixed for 5, 7, or 10 years and come with a 25-30 year amortization schedule. Loans can be recourse (personal guarantee) or non-recourse (no personal guarantee). Commercial mortgage loans typically carry prepayment penalties, whereas residential home loans usually do not. Specific terms will be determined by your lender’s underwriting team after your application is reviewed.

Commercial mortgage lenders typically lend up to 75-80% on an apartment purchase (down payment of 20-25% necessary). On other types of commercial property, commercial mortgage lenders will typically lend up to 70-75% (down payment of 25-30% necessary). An exception is for owner occupied business real estate (such as a business owner buying his own property). Owner/users may qualify for up to 90% LTV financing.

Texas Real Estate Loan TX Commercial Real Estate Loan

Select Commercial is a leading commercial real estate loan provider. We have excellent commercial real estate loan products and options available for owners and purchasers of commercial real estate. While we lend across the entire continental United States, we are able to give our best commercial mortgage rates and loan programs to certain areas that we feel are strong markets. Texas is one of the states that we consider to be a premium market and we actively look to originate good quality loans here for our clients. As an experienced commercial mortgage professional, with over 30 years of lending experience, we have many sources of capital to choose from when placing a commercial mortgage request with a lender. Having many lenders to choose from gives us advantages over any one individual source. Finding the lender that fits the needs of each client is what we do best. In the end, you get the best rate and terms available. If you are looking to obtain a commercial real estate loan, don't hesitate to contact us. There are many reasons why our customers like doing business with Select Commercial. We have a simplified application process and we do not charge any upfront application or processing fees. We typically offer 24-hour pre-approvals with no-cost and no-obligation. Our long term fixed rates are excellent, and we look to close within 45 days of application. Our staff is professional and knowledgeable, and we look forward to working with you on your next commercial mortgage transaction.

Commercial Real Estate Recent Closings

Texas Commercial Mortgages in 2024

As we approach the mid-2024 mark, the Texas commercial real estate loan market is navigating through various obstacles and challenges. In 2023, we witnessed persistent inflation and a rapid rise in interest rates initiated by the Federal Reserve. Higher interest rates (and the resulting higher mortgage payments) caused many existing properties to experience cash flow problems, leading to numerous sales cancellations. Towards the end of 2023, inflation began to ease significantly, falling to around 3.4% by December. The Federal Reserve has announced its intention to continue raising short-term rates in 2024, albeit at a slower pace. Their goal is to reduce inflation to their target rate of approximately 2%. Higher rates and tighter cash flow are expected to push commercial mortgage rates up and commercial real estate values down.

While economists anticipate a slowdown in 2024, most remain hopeful that a severe recession can be avoided. Corporate profits are strong, and employment numbers are solid. Although some companies have announced layoffs, most believe these will not be as dramatic as in past recessions. Experts expect unemployment to remain below 6%, a positive sign that this recession will not be severe. Economists predict that lower inflation might cause a softening of rates in the third and fourth quarters of 2024.

In 2024, the Texas commercial real estate market will be most strongly impacted by the increased rates resulting from Federal Reserve actions. At the start of 2023, the rate on the 10-year Treasury was 3.84%. As of May 22nd, 2024, this yield is around 4.41%. Since most commercial mortgage loans are based on the 10-year Treasury, many properties will not support high-leverage commercial mortgages due to insufficient cash flow. This will likely result in either sellers being forced to lower asking prices or sellers not putting their properties on the market in 2024.

There is some positive news for commercial mortgage loans in 2024. Assuming the rate of inflation continues to lessen, we might see a drop in commercial mortgage rates in the third and fourth quarters of 2024. There is a significant amount of securitized loans set to mature in 2024 in the commercial mortgage-backed securities (CMBS) market. These loans will need to be refinanced, and this high level of activity is likely to generate movement in the capital markets.

As we move further into 2024, commercial mortgage rates remain very volatile, and the market is expected to get off to a slow start. We hope to see a leveling-off effect later in the year and a resumption of activity in the latter half of 2024.

How will inflation influence commercial mortgage loans in 2024?

2024 Insights Into Industrial Commercial Mortgage Loans

Texas commercial real estate loan - industrial Industrial Loan

Industrial and warehouse properties have managed to maintain a balance between supply and demand due to their shorter development cycles. This sector continues to thrive, supported by the growth in brick-and-mortar retail and e-commerce, which now constitutes 15.6% of total retail sales. The trends of nearshoring and the need to replace outdated industrial buildings are expected to drive construction and demand in the latter half of 2024 and beyond. Although there was a significant drop in net absorption in the first quarter, rent growth remains the fastest in the commercial real estate market, with industrial rents up by 5.3% from the previous year. The sector benefits from robust e-commerce activity and resilient construction spending, maintaining a national vacancy rate around 5.5%. The digital transformation and demand for warehouse/flex spaces, especially cold storage, have fueled significant growth in this sector.

2024 Insights Into Retail Commercial Mortgage Loans

Texas commercial real estate loan - retail Retail Loan

The retail sector has experienced steady performance, with entertainment venues, restaurants, and similar businesses maintaining stable revenues. However, an economic downturn could negatively impact consumer spending, affecting this sector. Demand for retail spaces fell below pre-pandemic levels in the first quarter, with net absorption decreasing by approximately 30 percentage points. Despite this, low vacancy rates, around 4%, and limited new supply have kept the market stable. As new construction deliveries diminish, market conditions could tighten, supporting rental rates and occupancy levels. The sector has shown resilience, benefiting from strong consumption and a lack of new construction, leading to a national vacancy rate of around 4%, the lowest in two decades.

2024 Insights Into Office Commercial Mortgage Loans

Texas commercial real estate loan - office Office Loan

The office sector continues to face challenges with rising vacancies and declining demand. The national office vacancy rate reached 19.6% in Q4 2023, the highest on record. Despite the struggles, top-tier office buildings in prime locations continue to perform well. The shift towards hybrid work models and reduced office space requirements have increased vacancies, with leasing activity about 30 percentage points below pre-pandemic levels. While overall market demand for office space remains uncertain, some markets, especially in sunbelt cities, show strong demand and stable occupancy trends. The national occupancy rate has surpassed 50% for the first time since the pandemic, indicating potential stabilization.

2024 Insights Into Hotel and Motel Commercial Mortgage Loans

Texas commercial real estate loan - motel Hotel/Motel Loan

As 2024 begins, the hospitality sector shows signs of recovery. The hotel industry is nearing pre-pandemic occupancy levels, with rates only 0.6% below those levels. Average daily rates (ADR) and revenue per available room (RevPAR) have surpassed pre-pandemic figures. Although travel activity normalized after the post-pandemic surge, property values remain near all-time highs. In 2023, while occupancy remained flat, RevPAR rose by 2.4%, driven by luxury hotel demand. The easing of travel restrictions and increased business travel as office attendance rises contribute positively to this sector.

What areas of Texas does Select Commercial provide financing?

Select Commercial provides commercial real estate loans throughout the state of Texas including but not limited to the areas below.