- Agency loans (Fannie Mae, Freddie Mac) finance only multifamily and select seniors/affordable housing; CMBS finances all major property types.
- For stabilized, conforming apartments, agency usually offers the lowest rate; CMBS wins on flexibility and asset breadth.
- Both are non-recourse and fixed-rate; agency typically uses yield maintenance, CMBS typically uses defeasance.
- Agency offers strong interest-only options and mission-driven discounts for affordable/workforce housing.
- CMBS is the answer for hotels, retail, office, industrial, self-storage, and non-conforming multifamily.
"CMBS vs. agency" is one of the most common financing questions commercial real estate owners ask — but it only applies to multifamily, because agency lending (Fannie Mae and Freddie Mac) is limited to apartments and a few specialized residential categories. For every other property type — hotels, retail, office, industrial, self-storage — CMBS (or a bank/bridge loan) is the answer by default. Where both compete is stabilized apartment financing, and there the choice comes down to rate versus flexibility.
This guide gives you a clear framework for choosing between the two.
Head-to-Head Comparison
| Feature | CMBS (Conduit) | Agency (Fannie/Freddie) |
|---|---|---|
| Property types | All major CRE types | Multifamily, seniors, affordable only |
| Rate | Treasury/swap + spread | Usually tightest for conforming MF |
| Max LTV | Up to 75% | Up to 75–80% |
| Recourse | Non-recourse | Non-recourse |
| Prepayment | Defeasance (typical) | Yield maintenance (typical) |
| Interest-only | At lower leverage | Often generous IO |
| Best for | Non-conforming, mixed-use, all asset types | Stabilized market-rate & affordable apartments |
When Agency Wins
Choose agency financing when you own a stabilized, market-rate or affordable apartment community in a market the agencies actively serve. Agency execution typically delivers the lowest rate, thanks to the implicit government backing of Fannie Mae and Freddie Mac, plus attractive interest-only periods and mission-driven pricing discounts for properties that meet affordability or workforce-housing criteria. For a clean conforming apartment deal, the agency quote is usually the one to beat. See Agency Multifamily Loans 2026.
When CMBS Wins
Choose CMBS when the property is anything other than conforming multifamily, or when an apartment deal falls outside the agency box. CMBS finances hotels, retail, office, industrial, and self-storage that agencies simply cannot touch. Even within multifamily, CMBS handles tertiary-market properties, mixed-use buildings with substantial commercial income, assets needing light rehab, and borrowers who value a single lender relationship across a diversified portfolio. CMBS is also asset-agnostic — there is no affordability reporting or mission overlay.
The Prepayment Difference
Both products restrict prepayment, but through different mechanisms. CMBS typically requires defeasance — replacing the property as collateral with a portfolio of government securities. Agency loans typically use yield maintenance — a lump-sum penalty that compensates the lender for lost interest. The cost of each depends on where rates move; we break this down in Yield Maintenance vs. Defeasance.
A Simple Decision Framework
Ask three questions. Is it multifamily? If no, use CMBS (or bank/bridge). If yes, continue. Is it stabilized and conforming in an agency-served market? If yes, get an agency quote first. Does it have a wrinkle — tertiary market, heavy commercial component, light rehab, speed need? If yes, CMBS is likely the better fit. The smartest borrowers quote both and let the term sheets decide.
Frequently Asked Questions
What is the main difference between CMBS and agency loans?
Agency loans (Fannie Mae and Freddie Mac) finance only multifamily and certain residential categories and usually offer the lowest rate for conforming apartments. CMBS finances all major commercial property types and offers more flexibility for non-conforming deals. Both are non-recourse and fixed-rate.
Can I get an agency loan on a hotel or office building?
No. Fannie Mae and Freddie Mac only finance multifamily and select residential property types such as seniors housing and affordable housing. Hotels, office, retail, industrial, and self-storage must use CMBS, bank, or bridge financing.
Which has cheaper prepayment, CMBS or agency?
It depends on interest-rate movements. CMBS typically uses defeasance and agency typically uses yield maintenance. When rates rise, defeasance can become relatively cheaper; when rates fall, both penalties grow. Neither is universally cheaper — the cost is deal- and timing-specific.
Should I quote both CMBS and agency for my apartment deal?
Yes. For a stabilized apartment property, quoting both is the smartest approach. Agency often wins on rate for conforming deals, but CMBS may offer more proceeds or flexibility depending on the specifics. First Realty Capital quotes both so you can compare side by side.
First Realty Capital arranges both CMBS and agency financing and will run both quotes on your multifamily deal. Contact us for a side-by-side comparison.
Related reading: CMBS Multifamily Loans | Yield Maintenance vs. Defeasance | What Is a Conduit Loan?
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