Difference Between CMBS & CML


Investments in the CRE industry can be the most fruitful way to earn passive income over a long period. However, it also comes with the challenge of huge investments, which are hard to find on your own.

This is where the use of some financing can be helpful. There are now a lot of lenders, both private and traditional ones, who provide the required money the investors need to complete the project.

No doubt the choices there are quite wide, but out of all, CMBS and CML are the most popular ones. It is definitely because of the benefits they provide. The name might confuse many people as they might think both the financing options are similar, but there is a huge difference between them.

Only with a proper understanding of both financing options will you be able to understand the fruitful one for your specific needs. You can go ahead and read to find all the essential information you need for a hassle-free experience.

What is a CMBS loan?

In simple words, CMBS or commercial mortgage-based securities are fixed-income investment products. They are all packed by mortgages on commercial property. Using CMBS, the investors can get better liquidity on their investment properties.

However, there is no rule for standardizing the structures of CMBS, as the valuation here can be a bit difficult.

The underlying security of CMBS includes a number of commercial mortgages that vary in terms of values and property types, such as commercial real estate, family dwellings, etc. No doubt, the financing option can benefit investors, but one needs to understand it’s working properly before going ahead with it.

Just like any other collateralized mortgage obligation or collectivized debt obligation, CMBS is a type of bond. The mortgage loans that offer single commercial mortgage-backed security act as collateral if the borrower defaults. Here, the principle and the interest are paid off after selling the property.

These types of commercial real estate loans generally are contained within the trust with different property types, terms, and amounts. There are certain loans that are securitized into CMBS.

It includes loans for properties such as complexes, apartment buildings, hotels, factories, office buildings, and shopping malls, often within the same trust.

They are a type of nonrecourse debt or a commercial that is secured only by collateral. However, CMBS can be quite a complex investment.

It involves a lot of market participants, including master services, primary services, directing certificate holders, and others. Each of them performs a specific role to ensure CMBS performs properly.

Benefits of CMBS loan

CMBS loans have great benefits for those in the industry. First of all, these loans are available to a wide range of borrowers, including all those who might not be able to secure an additional loan from the lenders due to previous bankruptcy, poor credit, or strict collateral.

CMBS loans are a non-resource. This means even if the borrower defaults on the loan, the lender is not liable to go after the personal property to pay off the debt.

Besides, the CMBS loan offers a relatively high-level mortgage. It can go up to 75% for most of the property types.

But the most important benefit here is that the CMBS loan rates are extremely competitive. This means they can often beat out the comparable bank loan rates. CMBS loans are also easy to close.

This makes it somewhat easy for the borrower to exit the property before ending the loan term.

Finally, it is quite essential to mention that the CMBS loan format allows commercial cash-out refinancing. It is quite a great opportunity for businesses who want to extract equity out of the commercial property for renovating them or for getting the funds to expand the main business.

What is a CML loan?

If you have been running a successful business for quite some time or are interested in updating or purchasing a commercial real estate property, you might already have heard of commercial mortgage loans.

They are not similar to the traditional commercial mortgage loans. However, instead of borrowing money to purchase residential property here, you secure the property or land for commercials.

Examples of commercial property types include industrial, warehouse, buildings, apartments, complexes, shopping centers, etc.

Besides, you can also use CML loans for developing an existing commercial property. In case you already have one, you can use the funds from the loan to extend the premises and ensure the business operations go on smoothly.

While some of the businesses are successful in handling their operations from home, the majority require office or storage to welcome the customers. It depends entirely on the industry.

When this happens, there will be a requirement for a huge investment. Thus, the commercial loans turned out to be extremely fruitful. They will offer the assistance you require during a tough time, allowing you to carry on with your business hassle-free.

Benefits of CML loans

When it comes to basic financing in the CRE industry, CML loans happen to be the top choice of all. Although a mortgage backs them, it is extremely beneficial for the investors as they will be able to acquire the financing as and when needed.

The CML loans can easily be customized to fit the requirements of both the borrowers and the lenders. They provide a great opportunity for the borrowers to get the required funding on time.

Although there are not as many benefits as compared to the CMBS loans, the CML loan definitely is worth giving a shot. But the only thing to note here is if you fail to make payment of the loan amount, then the lender can go after the property. He will sell it off to get back the money he has provided the borrower as a loan.

There are varying and fluctuating rates available with different types of mortgage lenders. Here, research can be extremely beneficial to find those who can provide you with a competitive rate to get the financing done per your terms.

However, it will require a lot of understanding of the market to find someone who can be trusted with the same. The best part is you can also get such types of loans available with a wide range of lenders in the industry. This makes it absolutely easy to carry on with the investment goal.

Understanding the difference

When it comes to mortgage-based loans, people generally get confused between CML and CMBS. But one needs to understand the differences greatly.

Commercial mortgage loans are basic loans that anyone in the industry can acquire to fulfill the business’s specific requirements. But this is not the same in the case of CMBS.

In contrast to CMBS, commercial mortgage loans can actually be customized to meet the demands of both the borrowers and the lender’s underwriting criteria. CML comes with a bespoke nature. Thus, it makes the process a lot more comprehensive.

Besides, a great amount of due diligence is done before providing the funding to the investors. It helps the lenders secure their money.

But despite all the due diligence the chances of getting loan approval is quite high. Just take time to find the right lender for the financing.

Although there is a minor difference between the two, the investors need to properly understand the market condition and their specific requirements to make the most of the available opportunity.

Commercial mortgage loans are historically attractive options to make use of the available opportunity at hand. However, it also comes with a lot of processing and due diligence. In contrast, CMBS is quite a new product.

The new entrance has forced life insurance companies to learn from the challenges and then recalibrate the whole loan investment model for a more long-term oriented approach.

Make sure you take your time to understand different aspects of this type of loan so that you do not end up facing any difficulties.

A comparison of both of the loan types is extremely crucial to decide which will fit your investment goals and will come with a promise of better growth for you.

No doubt, both loans provide a great opportunity for the borrowers. But research and comparison will make the experience absolutely comfortable for you to start with the investment journey and use it in your favor on time.


The CRE industry now comes with a lot of challenges. But with the availability of a wide variety of investment and financing options, things have now become comfortable for the borrowers. If you are looking for any sort of financing, you can consider getting professional support from Private Capital Investors.

They have got a well-known name in the industry. They will be able to provide a bit of clear insight about the best available financing option.

After considering your needs carefully, they will be able to offer you the financing option that comes with a great interest rate.

No matter your requirements there, experts are there to help you. Besides, they will also guide you with the current market conditions and help you make your investment worthwhile.

Want to learn more? Get in touch with us today.

Similar Blog

Want to learn more? Get in touch with us today.

Our experienced team is ready to assist with your financing needs.

2101 Cedar Springs Road Suite 1050 Dallas, TX 75201