| Commercial mortgage interest rates are a combination | | | | a broad range of indexes. The treasuries are popular |
| of the margin that the bank changes and the index | | | | but each individual lender has their preferences. The |
| that they use. For example if a bank quoted Prime (the | | | | index used is probably less important for the borrower |
| index) plus 2% (the margin) you're actual or "effective | | | | than the margin that the funding bank uses. |
| interest rate" would be 7% (Prime is currently at 5%). | | | | The margin is basically how the bank makes its money |
| Lenders use a wide range of indexes. On owner | | | | and its spread. The bank typically is borrowing the |
| occupant transactions Prime is still very popular and is | | | | money that they lend and therefore has a cost of |
| used much of the time. This is especially true with | | | | capital. The spread is the difference between what |
| floating rate loans. The SBA 7a program still uses | | | | they pay for their sources of capital and what they |
| Prime for example. Commercial investment deals use | | | | make off of lending money. |