Tap to get financing
Apartment Loans
Fannie Mae
Fannie MaeMultifamily Small Loan ProgramFannie Mae DUS Loans
Freddie Mac
Freddie MacSmall Balance LoansAffordable Housing Express Loans
FHA/HUD
HUD LEAN Loan ProcessingHUD 232/223(a)(7) Refinancing LoansHUD 232/223(f) LoansHUD 241(a) Supplemental LoansHUD 232 LoansHUD 223(a)(7) Refinancing LoanHUD 223(f) LoansHUD 221(d)(4) LoansHUD Apartment Loans
Non-agency
Life Company Apartment LoansHard Money Apartment LoansApartment Bridge LoansMezzanine FinancingSmall Apartment LoansBank LoansConstruction LoansCMBS Loans
Resources
BlogApartment Building InsuranceYield Maintenance CalculatorLoan Repayment CalculatorNOI CalculatorGross Rent Multiplier CalculatorDebt Service Coverage Ratio (DSCR) CalculatorDebt Yield CalculatorCash on Cash Return CalculatorCap Rate CalculatorBreak Even Ratio CalculatorApartment Mortgage CalculatorLoan To Value and Loan To Cost RatiosApartment Finance Due Diligence ResourcesHow to Purchase an Apartment Property
For Brokers
About us
TeamLeadership
(561) 556-9997
Get financing →
Newly Published
Jul 11 at Apartment Loans
Apartment Building Insurance: Comprehensively Protect Your Property
Nov 1 at Apartment Loans
What is Conduit Financing?
Sep 9 at Apartment Loans
Operating Expense Ratio Explained
Explore the Janover Network
May 8 at HUD Loans
The 2025 Developer's Guide to HUD Lender Matching
Apr 22 at Janover Inc. Investor Relations
Janover Inc. Announces Corporate Name Change to DeFi Development Corporation
Apr 16 at Janover Inc. Investor Relations
Janover Inc. to Host X Spaces Conversation on NAV Premiums
Was This Article Helpful?
Apartment Loans Secrets
2 min read
by Content Team

What is Conduit Financing?

In apartment property investing, conduit financing typically refers to the use of conduit loans - also known as cmbs loans - to finance the acquisition of an apartment property.

In this article:
  1. Conduit Financing in Apartment Property Investing
  2. Conduit Loans
  3. Sample Apartment Conduit Financing Terms
  4. Related Questions
  5. Get Financing
Start Your Application and Unlock the Power of Choice Experience expert guidance, competitive options, and unparalleled industry expertise.
Click Here to Get Quotes →
$5.6M offered by a Bank$1.2M offered by a Bank$2M offered by an Agency$1.4M offered by a Credit UnionClick Here to Get Quotes!

Conduit Financing in Apartment Property Investing

In the context of apartment property investing, conduit financing typically refers to the use of conduit loans - also known as CMBS loans - to finance the acquisition of an apartment asset. Much like with the general definition of conduit financing, cmbs loans involve the use of securitized, fixed-income investments, with the caveat that commercial real estate loans are used as collateral.

The collateralized loans are used to finance commercial properties such as residential apartment buildings, before being bundled together in a group of similar commercial mortgage loans. These larger groups are then packaged to be sold on a secondary market as secured bonds, categorized in what are known as tranches, organized by the level of risk involved.

Conduit Loans

Conduit financing is a good choice for borrowers with a lower net worth or who are looking to finance mixed-use properties. CMBS loans are also a great option for investors with credit or legal issues. Since CMBS financing is generally asset-focused, lenders are not as strict with borrower credit requirements and are more interested in the financial stability of the asset itself.

CMBS apartment loans are generally available with 10-year fixed-rate terms. Most of the time, they are non-recourse, and have a maximum LTV of 75%. In terms of prepayment, conduit loans often allow for defeasance, though yield maintenance can be an option in some cases.

Sample Apartment Conduit Financing Terms

  • Loan Size: $2 million+
  • Loan Term: Typically a 10-year fixed-rate (though other term lengths may be available)
  • Amortization: 20-30 year
  • Leverage: 75% Maximum LTV
  • DSCR: Minimum 1.25x DSCR
  • Debt Yield: Minimum 6.5% DY
  • Recourse: Generally non-recourse with standard “bad boy” carve-outs
  • Prepayment: Defeasance or yield maintenance
  • Related Questions

    What is the difference between conduit financing and traditional commercial real estate loans?

    The main difference between conduit financing and traditional commercial real estate loans is the underwriting guidelines. Traditional loans place great scrutiny on borrowers, often times limiting what is possible. CMBS loans, on the other hand, are readily available to new commercial property investors. Investors that cannot meet the strict conventional liquidity and possible net worth minimums can opt for a CMBS loan and receive the funding they need without all the red tape — quite often with superior rates and terms.

    CMBS loans are generally available with 10-year fixed-rate terms. Most of the time, they are non-recourse, and have a maximum LTV of 75%. In terms of prepayment, conduit loans often allow for defeasance, though yield maintenance can be an option in some cases.

    Pooling together single loans makes them more attractive to investors. It also allows investors to enter the commercial mortgage market. This increases the amount of available funding for commercial mortgage loans, and forces mortgage loans to be aggressively priced.

    What are the advantages of conduit financing for apartment loans?

    The advantages of conduit financing for apartment loans include:

    • Lower net worth requirements for borrowers
    • Asset-focused financing, allowing for more lenient credit requirements
    • 10-year fixed-rate terms
    • Non-recourse financing
    • Maximum LTV of 75%
    • Defeasance or yield maintenance prepayment options

    What are the requirements for obtaining a conduit loan?

    Conduit lenders typically require borrowers to have a minimum net worth and a minimum debt service coverage ratio (DSCR). The maximum loan-to-value (LTV) ratio is usually 75%, and the loan term is usually a 10-year fixed-rate. Prepayment options are generally defeasance or yield maintenance.

    For more information, please see the following sources:

    • What is Conduit Financing?
    • What You Need to Know Before Applying for a Commercial Real Estate Loan

    What are the risks associated with conduit financing?

    The risks associated with conduit financing include not getting a great servicing experience, as CMBS lenders don't service these loans themselves and hire a third-party servicer instead. Additionally, since these loans are pooled, securitized, and sold on the secondary market, borrowers are usually required to conduct either yield maintenance or defeasance in order to repay their loan. Furthermore, since these loans are securitized, borrowers who have trouble repaying their loans are unlikely to get any form of forbearance or foreclosure/default prevention assistance. Instead, if the borrower cannot make their monthly payments, they will likely default on the loan relatively quickly.

    Source: The Pros and Cons of CMBS Loans: A Guide

    What are the typical terms of a conduit loan?

    The typical terms of a conduit loan include a loan size of $2 million minimum, no maximum; 5-10 year fixed-rate terms with amortizations of 25-30 years; leverage of 75% maximum LTV/1.20-1.35x DSCR; pricing typically based on LTV and DSCR; assumability with a fee; prepayment penalties of defeasance or yield maintenance; and non-recourse with standard bad-boy carveouts. Appraisals are also required and paid for by the borrower.

    Source: CMBS and Conduit Loan Terms

    Source: What is Conduit Financing?

    Source: CMBS Primer: A Basic Guide to CMBS/Conduit Loans

In this article:
  1. Conduit Financing in Apartment Property Investing
  2. Conduit Loans
  3. Sample Apartment Conduit Financing Terms
  4. Related Questions
  5. Get Financing

Getting commercial property financing should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →

Janover: Your Partner in Growth

At Janover, we offer a wide range of services tailored to your unique needs. From commercial property loans and LP management to business loans and services for lenders, we're here to help you succeed.

Learn more about Janover →
Commercial Property Loans

Get the best CRE financing on the market.

Explore Financing Options →
LP Management

Syndicate deals on autopilot with Janover Connect.

Discover LP Management →
Business Loans

Match with the right kind of loan, in record time.

Find Business Loans →
For Lenders

Supercharge your loan pipeline. Unlock more deals.

Boost Your Loan Pipeline →
Apartment Loans

Apartment Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Commercial Real Estate Loans, SBA7a Loans, HUD Loans, Janover Insurance, Janover Pro, Janover Connect, and Janover Engage.

Janover Tech Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487
(561) 556-9997 
hello@apartment.loans

Loan Types

Bank Loans
CMBS
Construction Loans
Fannie Mae
Freddie Mac
HUD/FHA Apartment Loans
Commercial Loan Rates
For Commercial Mortgage Brokers

Site Information

Privacy Policy
Terms of Use


For Commercial Mortgage Brokers

This website is owned by a company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We have no affiliation with any government agency and are not a lender. We are a technology company that uses software and experience to bring lenders and borrowers together. By using this website, you agree to our use of cookies, our Terms of Use and our Privacy Policy. We use cookies to provide you with a great experience and to help our website run effectively.

Freddie Mac® and Optigo® are registered trademarks of Freddie Mac. Fannie Mae® is a registered trademark of Fannie Mae. We are not affiliated with the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), Freddie Mac or Fannie Mae.

This website utilizes artificial intelligence technologies to auto-generate responses, which have limitations in accuracy and appropriateness. Users should not rely upon AI-generated content for definitive advice and instead should confirm facts or consult professionals regarding any personal, legal, financial or other matters. The website owner is not responsible for damages allegedly arising from use of this website's AI.

Copyright © 2025 Janover Tech Inc. All rights reserved.

+

Fill out the form below and get the pricing and terms banks can't compete with.