By Trevor Damyan, Commercial Mortgage Broker at Commercial Lending Solutions
Commercial real estate sponsors face a foundational term length choice on fixed-rate loans: 5-year or 10-year. The 10-year is the most common term in CRE financing and is the standard agency, life co, and CMBS execution. The 5-year is more common on bank balance sheet, sometimes priced 10 to 30 basis points inside 10-year, and is favored by sponsors with shorter hold horizons or rate views. The decision affects coupon, refinance risk, prepayment exposure, and hold flexibility.
Get Quotes from Both →Rate ranges reflect indicative pricing as of April 2026, sourced from active CLS CRE quote pipeline. Pricing is property, sponsor, and structure dependent.
5-year fixed wins when the sponsor expects falling rates over the next 5 years, when bank balance sheet pricing on 5-year is meaningfully tighter than 10-year, or when the sponsor's planned hold matches the 5-year term naturally.
10-year fixed wins on long-term hold strategies, in rising or stable rate environments, or when the sponsor wants the certainty of locked cost of capital through a full economic cycle.
Start with hold horizon. 5-year hold favors 5-year term. 10-year hold favors 10-year term. Mismatched terms force unnecessary refinances or carry forward longer-term risk than needed.
Calculate the rate spread dollar value. On a $20M loan, 20 basis points (typical 5-year vs 10-year spread) over the 5-year fixed period is approximately $200K of saved interest. Over a 10-year horizon refinancing into a similar 5-year at year 5 in an unknown rate environment, the savings depends on year-5 market rates.
Run forward rate scenarios. Stress-test the 5-year refinance at year 5 against multiple rate scenarios (rates flat, rates up 100 bps, rates up 200 bps). The dollar exposure to a year-5 refinance event in a high-rate scenario can exceed the early-year coupon savings.
Consider lender ecosystem. 10-year fixed is the standard execution for agency, CMBS, life co, and HUD. 5-year fixed is more common on bank balance sheet. The sponsor's preferred lender ecosystem may dictate term length.
On a $24M multifamily refinance with the sponsor planning a 6 to 7 year hold and exit, the sponsor evaluated 5-year fixed bank balance sheet at 6.45 percent versus 10-year fixed Freddie Mac Optigo at 5.85 percent. The 5-year was 60 basis points wide of the 10-year on this specific deal (atypical reverse spread driven by bank balance sheet capacity dynamics). The sponsor took the 10-year Freddie Mac because the spread relationship was reversed from typical and the longer term provided full coverage of the planned 6 to 7 year hold without forcing an early refinance.
All deal references anonymize borrower and lender identities and use city-level geography only.
5-year versus 10-year fixed is rarely a question of pricing alone. Match the term to the hold horizon, evaluate the refinance risk at year 5, and stress-test the rate environment. Most institutional sponsors default to 10-year because it covers most realistic hold horizons.
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