Normalize each LOI into a side-by-side matrix capturing: all-in rate (index plus spread plus fee amortization ), proceeds, IO term, prepayment cost across multiple exit years, recourse percentage and burn-off, reserves (upfront vs. ongoing), exit fees, MAC clause width, and closing -certainty score. Headline rate is one of nine columns, not the basis for award.
What goes in the comparison matrix
All-in rate: index plus spread plus origination/exit fee amortized over expected hold. The headline coupon understates true cost; the all-in rate is the right comparison number.
Proceeds: dollar loan amount, sometimes equivalent in net-after-reserves dollars. Two LOIs at the same headline rate but different proceeds are different deals.
IO term and amortization schedule: 5 years IO on a 30-year amortization vs. 0 IO on a 25-year amortization changes annual debt service materially.
Prepayment menu and modeled cost: defeasance vs. yield maintenance vs. step-down vs. open. Model the prepay cost at the borrower's expected exit year and at one year earlier and one year later for sensitivity.
Recourse: full, partial (with percentage), non-recourse with carve-outs, with burn-off mechanics. A non-recourse LOI at +25 bps over a partial-recourse LOI is often a better deal.
Reserves: upfront cash trap, monthly funding, LC substitution rights. Express both as a working-capital-equivalent number for comparison.
Exit fees and prepay-window mechanics: 0% to 1.0% of loan amount; back-end open window length.
MAC clause: enumerated vs. open-ended language. A tight MAC vs. an open MAC is worth multiple bps of headline rate.
Closing certainty: lender execution track record, rate-lock structure, deposit refundability mechanics.
Source notes
- treasury, <a href="/glossary/sofr" data-term="sofr" title="The benchmark rate for U.S. floating-rate commercial debt, replacing LIBOR after the 2023 transition. Almost all bridge loans price at SOFR plus a spread.">SOFR</a>, prime
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1
- Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) · Board of Governors of the Federal Reserve System · 2026-Q1