Refi if current debt yield supports the loan with proceeds matching the existing balance plus reasonable equity. Sell if the property has appreciated enough to clear the loan with acceptable IRR. Hold via modification or extension if neither refi nor sale produces an acceptable outcome and the lender is willing to wait.
The decision in plain English
Most maturing CRE loans in 2026 face one of three outcomes: refinance with new equity to close the proceeds gap, sell the property to clear the loan, or modify/extend the existing loan with the existing lender.
Which outcome is right depends on three numbers: refi proceeds at current rates and current sizing tests, sale price at current cap rates and current buyer demand, and existing loan balance vs. these two outcomes.
Step 1: refi math at current rates
Run sizing at current rates: debt yield (8.0% to 10.0% depending on asset), DSCR (1.20x to 1.40x at proposed rate / 30-year amortization), LTV (60% to 75%). Lowest of the three is the max loan.
Compare max loan to existing balance. If max loan ≥ existing balance: clean refi. If max loan < existing balance by 10% to 20%: bring equity to close the gap; manageable. If gap exceeds 25% to 30%: refi requires significant new equity that may not produce acceptable returns.
Step 2: sale math at current cap rates
Get a current broker BOV at current cap rates. Subtract loan payoff (including any prepayment penalty), transaction costs (typically 2% to 4% of price), and tax (basis recovery + depreciation recapture; consult tax counsel).
Compare net proceeds to original equity invested. Compute realized IRR and equity multiple. Compare to opportunity cost of capital, what could the equity earn if redeployed?
Sale wins when: refi gap is large, sale produces acceptable IRR, and the next-best deployment opportunity is attractive.
Step 3: hold math (modification/extension)
Available when neither refi nor sale produces an acceptable outcome AND the lender is willing to wait. Bank balance-sheet loans modify often; life co loans modify selectively; CMBS loans modify through the special servicer following the PSA.
Hold makes sense when: the asset is structurally healthy and the issue is timing (rates expected to fall, value expected to recover), the sponsor has access to the paydown capital, and the lender prefers waiting over foreclosure.
Worked example: multifamily refi gap
Existing: $20M agency loan, 4.0% rate, matures in 60 days. Property: $1.7M trailing NOI, $26M as-is value at current cap rates.
Refi at current rates: 8.0% debt yield max = $21.25M; 1.25x DSCR at 6.0%/30yr = $18.9M; 75% LTV = $19.5M. Binding: DSCR at $18.9M. Refi gap: $1.1M.
Hold: lender modifies for 24 months at $400K paydown + interest reserve; sponsor commits to refi at maturity at projected rate environment. Buys time.
Right answer: refi with $1.1M new equity if accretive; modification if not.
When to consider a sale
Property has materially appreciated since acquisition AND current cap rates are favorable. Refi proceeds gap is small or zero. Sale produces realized IRR meeting or beating original underwriting.
Partner dynamics force a sale (fund maturity, partnership dispute, succession). Tax planning windows. Asset no longer fits the sponsor's strategy.
When to consider refinancing
Long-term hold strategy is intact. Property cash flow supports current-rate sizing within 10% to 15% of existing balance. Sponsor has equity available to bridge a small gap without dilution.
Sale would trigger material tax (depreciation recapture) and the after-tax proceeds aren't redeployable accretively.
Frequently asked questions
How do I know if my lender will modify?
Bank lenders typically signal willingness to discuss in early outreach (90+ days before maturity). Life co lenders are case-by-case. CMBS modifications happen through the special servicer following the PSA, start the conversation through the master servicer 60+ days before maturity.
What's the cost of a typical modification?
Modification fee 0.25% to 1.0% of balance. Lender legal $25K to $75K. Sponsor's costs (advisor, legal, broker BOV) $25K to $75K. Plus the paydown and interest reserve, which are economic but not technically 'cost.'
Should I run a refi process even if I plan to sell?
Often yes, the refi quotes inform the buyer's perception of value (cap rate / debt yield) and create alternative if the sale process underperforms. The marginal cost of running both is small relative to the optionality.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1
- Commercial/Multifamily Mortgage Maturities Outlook · Mortgage Bankers Association · 2026-02
- Financial Stability Report · Board of Governors of the Federal Reserve System · 2025-11