Life Insurance Commercial Real Estate Loans

Life insurance company commercial real estate loans are long-term mortgage solutions backed by life insurance providers. While borrowers typically work through intermediaries—such as mortgage advisors or brokers—the underwriting and funding ultimately come from the insurance companies themselves.

These institutions prioritize low-risk, stable investments, which directly influences the types of properties and terms they support.

Life insurance companies focus on high-quality, low-risk investments. That means they usually finance:

• Class A properties that are newer and in excellent condition
• Multifamily communities, including mixed-use complexes
• Retail centers with strong anchor tenants and performance histories
• Office buildings in core downtown locations
• Industrial properties near distribution hubs
• Top-tier hospitality assets, such as resorts and branded hotels

Most lenders prefer properties in primary or strong secondary markets, and some may even restrict lending to primary markets only. While construction loans are rarely offered, they may be considered for exceptional projects with strong fundamentals.

Life companies apply some of the most conservative underwriting standards in the commercial lending space, all geared toward risk mitigation.

Key criteria include:

• Loan-to-Value (LTV): Typically capped around 65%, occasionally reaching 70% for top-tier borrowers. LTVs above 75% are extremely rare.
• Debt Service Coverage Ratio (DSCR): Minimum 1.25x, calculated based on current income, not projections.
• Loan Amount: Usually starts at $1 million, with many lenders preferring deals of $2 million or more.

Life insurance company CRE loans are known for offering long, fixed-rate terms—a strategic contrast to the shorter terms typical of bank loans.

• Terms: Often 15, 20, or up to 30 years
• Amortization: Up to 30 years
• Rates: Fixed and competitive over the full term, typically lower than conventional options for similar durations

These terms are especially attractive to borrowers seeking predictability and long-term stability.

• Recourse Options: These loans may be structured as non-recourse, limited recourse, or full recourse.
  1. Non-recourse means the lender’s claim is limited to the property itself, offering personal liability protection.
  2. Standard carve-outs apply, typically covering fraud or willful misconduct.
• Assumable Loans: Most life insurance loans are assumable, allowing qualified buyers to take over the loan without refinancing.
  1. Buyers must meet the original loan’s underwriting standards, and a transfer fee may apply.
• Prepayment Penalties: These loans generally include prepayment penalties, as they’re intended for long-term holds.
  1. Structures may include yield maintenance, breakage costs, or a step-down schedule where penalties decrease over time (e.g., 5–10 years).