Short answer
Compare the timing and amount of all loan cash flows, including fees and prepayment. Dividing upfront fees by the holding period is only a rough comparison; an effective annual cost calculation also accounts for payment timing and amortization.
Worked comparison
Show both term sheets and every cash flow before naming a winner. A higher headline coupon can still be the lower all-in cost once fees, servicing, reserves, and prepayment are counted.
Other often-overlooked costs
Reserve funding at closing (TI/LC, cap-ex, debt service, real-estate tax escrows, insurance escrows) ties up cash that could otherwise be deployed. Compare lenders on reserve requirements, not just rate.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1