What is a rate lock deposit on a credit union commercial term sheet?

A rate lock deposit secures a quoted interest rate for a defined window while the borrower assembles underwriting documentation. This loan carried an $8,000 deposit tied to a 21-day courtesy rate lock, with an option to extend the lock an additional 14 days for a 0.50% fee if the borrower needed more time.

Why would a lender require tenants to subordinate their leases to a new deed of trust?

Tenant subordination ensures the lender's lien takes priority over existing lease interests, so that in a default scenario the lender's security position is not complicated by tenants claiming rights superior to the loan. This loan required all tenants in the building to subordinate their interest to the new deed of trust as a condition of closing, with no junior liens permitted at all.

How is loan-to-value determined on a credit union commercial acquisition loan?

The lender orders an appraisal from a credit-union-approved appraiser and caps the loan at a maximum percentage of that appraised value. This loan capped loan-to-value at 70%, with the ratio also subject to a minimum 1.30x debt coverage ratio calculated against market rents, whichever constraint proved more restrictive.

Why does loan amortization sometimes get tied to a building's remaining economic life?

A lender wants assurance the loan will fully amortize within the useful life of the collateral securing it, so a building nearing the end of its economic life may not qualify for a full standard amortization schedule. This loan required the amortization period to be less than or equal to the building's remaining economic life as determined by the lender's approved appraiser, which is why the facility landed at 25 years rather than a longer schedule.

Case Study: $3.9M Mixed-Use Purchase Loan with a Credit Union in Los Angeles

Deal at a Glance

Loan Amount	$3,900,000
Property	Mixed-use commercial property
Location	Los Angeles, California
Transaction	Purchase / acquisition
Lender	a Los Angeles-based credit union
Rate	5.5% fixed (indicative), 5-year program
Amortization	25 years (capped to building's remaining economic life)
Term	5 years maturity
Maximum LTV	70%
Minimum DSCR	1.30x, based on market rents
Prepayment Penalty	2%-1%-0% in years one through three
Loan Fee	0.5 points plus $2,500 documentation preparation fee
Junior Liens	None permitted; all tenants required to subordinate to the new deed of trust
Closed	Q2 2023

The Deal That Walked in the Door

We are Commercial Lending Solutions, a commercial mortgage brokerage based in Los Angeles, and this acquisition brought us a buyer group under contract to purchase a mixed-use building on a well-traveled Los Angeles corridor. The property carried an existing rent roll of ground-floor and upper-level tenants, and the buyers needed acquisition financing sized correctly against market rents rather than simply the in-place, potentially below-market leases.

Mixed-use buildings in Los Angeles frequently carry a mix of legacy leases signed years apart at different rates, and a lender willing to underwrite to market rent potential, rather than strictly the existing rent roll, opens up meaningfully more acquisition leverage for a buyer. Commercial Lending Solutions specializes in structuring acquisition financing with credit unions and other relationship-driven portfolio lenders for investors across Los Angeles and the broader Southern California, CA market.

What Made It Hard

A tight rate-lock window. The indicative 5.5% rate carried only a 21-day courtesy lock, with the buyer required to return the signed term sheet, the deposit, and a full underwriting document package within that window or see the rate float with the index.
A full tenant subordination requirement. With no junior liens of any kind permitted against the property, every existing tenant had to formally subordinate their leasehold interest to the new first deed of trust before closing, a coordination task across multiple, unrelated tenancies.
Amortization tied to the building's remaining economic life. Rather than a flat standard schedule, the credit union required the amortization period to fit within the property's remaining economic life as determined by its own approved appraiser, adding a variable the buyer couldn't fully control until the appraisal came back.

How We Ran the Process

Trevor Damyan, a California-licensed real estate broker (CA DRE 02244836), placed this loan with a Los Angeles-based credit union, with the signed term sheet dated March 28, 2023:

$3,900,000 to fund the purchase, secured by a first trust deed on the property
An indicative 5.5% fixed rate on a five-year program, protected by a 21-day courtesy rate lock from the term sheet date, extendable an additional 14 days for a 0.50% fee if needed
25-year amortization, capped to the building's remaining economic life as determined by the credit union's approved appraiser, against a five-year maturity term
A maximum 70% loan-to-value based on a credit-union-reviewed appraisal, subject to a minimum 1.30x debt coverage ratio calculated against market rents rather than simply the existing rent roll
No junior liens permitted against the collateral, with every tenant in the building required to subordinate their lease interest to the new deed of trust
A declining prepayment penalty of 2% in year one, 1% in year two, and 0% starting in year three
0.5 points plus a $2,500 documentation preparation fee, with the borrower responsible for third-party out-of-pocket expenses and other processing costs
An $8,000 good-faith deposit applied against underwriting costs and legal fees, with any unspent balance returned to the borrower or credited toward closing costs
Ongoing covenants: annual financial statements or tax returns confirming the borrowing entity maintains a 1.30x business debt coverage ratio, plus the credit union's right to require annual property operating statements

The acquisition closed within the rate-lock window, giving the buyer group a fixed five-year facility underwritten to market rent potential on a building where tenant lease terms varied widely.

"This deal came together because the credit union was willing to underwrite to market rent potential instead of a rent roll padded with legacy leases signed years apart. That is the kind of lender fit that saves a mixed-use buyer real leverage."
, Trevor Damyan, Commercial Lending Solutions

Why We Won This One

Getting the buyer's full underwriting package assembled and back to the credit union inside the 21-day rate-lock window is what protected the 5.5% rate. Term sheets like this one are explicit that missing the deadline means the rate floats with the index from that point forward, so managing the document collection process, tax returns, financial statements, business formation documents, and the guarantors' personal financial statements, against a hard clock kept the buyer's pricing intact.

Coordinating the tenant subordination requirement early, rather than treating it as a closing-week formality, also mattered on a mixed-use property with multiple unrelated tenancies. Getting every tenant's subordination agreement signed and in file before the credit union's final approval kept a multi-party administrative task from becoming the deal's critical path.

Is This Structure Right for Your Deal?

If you're acquiring a mixed-use property with a rent roll that undersells its market potential, a lender willing to underwrite to market rents can unlock more proceeds than one that strictly follows the in-place leases. We arrange permanent loans and retail and mixed-use commercial financing from a network of more than 1,000 capital sources.

Apply for financing or call us at 310.708.0690 to talk through your acquisition.

This is one of 32 closings we have arranged in Los Angeles County. Read about how we work as a Los Angeles commercial mortgage broker, see our Los Angeles commercial mortgage loans, or browse all 46 California closed deals.

Trevor Damyan

Commercial Mortgage Broker, Commercial Lending Solutions | CA DRE 02244836

Trevor Damyan is a commercial mortgage broker at Commercial Lending Solutions with a background in structured finance at CBRE and Marcus and Millichap Capital Corporation. He specializes in bridge loans, construction financing, SBA programs, DSCR loans, and complex capital structures for investors and developers across all 50 states.

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