Full-term interest-only structure on agency and CMBS loans typically costs 5 to 15 basis points of additional spread compared to a 30-year amortizing structure. On a $30 million loan, 5 to 15 basis points is $15,000 to $45,000 a year.
Why do lenders charge for interest-only?
Amortization gradually reduces lender exposure as principal drops; interest-only does not. The lender therefore carries higher refinance risk at maturity and prices for it. Partial-term interest-only (e.g. 5 years IO on a 10-year loan) typically costs 0 to 5 basis points; full-term costs more.
Should sponsors pay for it?
Yes, on most stabilized acquisitions where cash-on-cash matters. The cash flow uplift improves both ongoing distributions and the refinance optionality at maturity. The exception: long-hold investors with no exit horizon may prefer amortization to deleverage organically over time.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1