The maturity date is the contractual date on which a CRE loan’s outstanding principal balance, plus accrued interest and fees, becomes due in full. Because CRE loans rarely amortize fully, a balloon payment of the remaining principal is repaid at maturity, typically through a refinance or property sale. A loan that cannot be repaid or refinanced is in maturity default.
How long are CRE loan terms?
Terms range from 1 to 3 years for bridge loans to 10 to 30 years for permanent loans, but 5-, 7- and 10-year terms are the most common. The maturity date is not the amortization schedule, which is typically longer.
For bridge loans with extension options, the maturity date depends on whether the extension conditions are met. Failing an extension test effectively accelerates maturity.
Why is maturity risk so significant?
Maturity risk is among the most significant risks in CRE debt management, and it has intensified as the industry faces a historically large “maturity wall”: hundreds of billions in CRE loans maturing into a higher interest rate environment. A borrower who financed at a 4% rate five years ago may face refinancing at 6.5% or higher, which fundamentally changes the deal economics. If the new rate does not support the same leverage, the borrower must inject equity to pay down the loan at maturity.
A maturity default gives the lender the right to exercise remedies, including foreclosure. Portfolio managers must track maturity dates across every loan, model refinancing scenarios at current and projected rates, and begin planning refinancing strategies 12 to 18 months before maturity.
How maturity dates show up in LoanBoss
LoanBoss tracks maturity dates and extension notices as critical dates across the portfolio, with extension eligibility analysis and refinancing scenario modeling so capital needs are planned well in advance.
Frequently Asked Questions
What is a balloon payment?
The unpaid principal that remains when the loan term ends before the amortization schedule does. It is repaid at maturity through a refinance or sale.
What is a maturity default?
The failure to repay or refinance the loan on its maturity date. It gives the lender the right to exercise remedies, including foreclosure, regardless of how the property is performing.
When should refinancing planning start?
12 to 18 months before maturity. That leaves time to model refinancing scenarios at current and projected rates.
Related Terms
- Amortization
- Bridge Loan
- Forbearance
- Defeasance
- Balloon Payment
- Loan Critical Date Tracking: Maturities, Extensions, Cap Replacements and Everything Else
- The Maturity Wall: A Refinancing Workflow Playbook for CRE Debt Teams
Part of the LoanBoss CRE Debt Glossary. For hedging-specific terms, see Pensford’s resources.
Sources
- LoanBoss CRE Debt Glossary