Permanent Loans: Long-Term Debt for Stabilized Properties

Permanent loans are the backbone of commercial real estate finance. They’re used to retire construction loans, replace bridge debt, or finance acquisitions of stabilized assets. These loans offer long-term certainty — but they’re also less flexible and more conservative.

This guide, part of our commercial real estate financing guide for brokers, will help you spot when permanent debt fits, package it correctly, and avoid the mistakes that can sink a solid deal.

What Is a Permanent Loan?

Permanent loans are long-term commercial mortgages, typically with terms from 5 to 30 years. They’re used to finance stabilized, income-producing properties and are often provided by banks, life insurance companies, or government-sponsored entities like Fannie Mae, Freddie Mac, and HUD.

Unlike short-term or bridge loans, permanent loans are meant to stick. They’re less flexible but much more stable — offering borrowers predictability over time. These are the loans that replace construction or bridge debt once the property is leased up and generating consistent income.

Expect fixed or floating rates, amortization over 25 to 30 years, and prepayment penalties that can vary widely. Some are full recourse, others are partial or nonrecourse depending on the lender and the borrower’s strength.

When Permanent Financing Makes Sense

Permanent loans are best suited for clean, low-risk deals — ones where the property is stabilized, the tenant base is solid, and the sponsor wants long-term certainty. They’re ideal for borrowers with a buy-and-hold strategy, or for those refinancing after completing value-add improvements.

The key is stability. If there’s still lease-up underway, construction ongoing, or major tenant turnover expected, the deal likely isn’t ready yet.

Use permanent financing when:

• The property is fully leased or nearly stabilized
• The borrower wants predictable payments over time
• There’s no business plan left to execute — or it’s already been executed
• The borrower can provide full financials and documentation

What Lenders Look For

• Stabilization: The property should be leased and generating consistent NOI
• Borrower experience: Strong resumes, liquidity, and net worth matter
• DSCR: Usually a minimum of 1.20x to 1.35x
• LTV: Typically 60 to 75 percent
• Asset type and market: Institutional lenders prefer standard property types in core or secondary markets

Lenders are looking for safe, predictable performance — not upside or potential.

What Brokers Often Miss

1. Trying to place a transitional asset

If the property isn’t stabilized, you’re wasting everyone’s time. Use bridge debt until it qualifies.

2. Underestimating required documentation

Permanent loans come with real paperwork. Rent rolls, P&Ls, trailing 12s, personal financials — don’t skip this.

3. Overpromising rate and leverage

Terms are great — when the deal is clean. Weaker sponsors or off-market assets will price differently.

4. Ignoring prepay structure

Some borrowers get locked into unfavorable terms. Always flag prepayment penalties early.

5. Misaligning lender and borrower goals

Don’t send a small-balance deal to a life company. Don’t send a cash-out refi to a conservative bank. Know your match.

What to Do If Your Deal Isn’t Ready Yet

If the property isn’t fully stabilized, or the borrower isn’t strong enough yet, you may need to reposition:

• Use bridge debt to carry the deal through stabilization
• Bring in a stronger guarantor or co-borrower
• Recast NOI with better documentation to improve DSCR
• Reduce loan size or accept partial recourse if needed
• Revisit permanent debt post-seasoning — especially post-renovation or lease-up

Permanent loans are end-game financing. If your deal isn’t ready, don’t force it.

Tips to Place These Deals

• Package financials clearly and cleanly — lenders will ask for backups
• Know your lender’s preferred geography, asset types, and minimum deal sizes
• Talk prepay early — it’s often a deal killer if left unspoken
• Run DSCR and LTV math yourself before shopping it
• Don’t shotgun — target lenders whose credit boxes actually fit

Final Word

Permanent loans are built for stability. That stability comes with a tradeoff: less flexibility, more documentation, and slower underwriting. But when your deal fits the box — and you package it properly — this kind of financing can deliver excellent terms and long-term predictability for your client.

Your job as a broker is to help the lender see what they want to see: a proven asset, a qualified borrower, and a risk that looks as boring as possible. If you can do that, you won’t just get to the closing table — you’ll be the one they call again next time.. They’re slower, more documentation-heavy, and less forgiving — but when you match the deal correctly, they can lock in great long-term terms for your client.

Understand what makes these deals attractive to lenders, and set the table properly. If you can do that, you’ll avoid wasted time — and build trust with both borrowers and capital sources.