Conduit vs Portfolio

Conduit vs Portfolio: Which Is Right for You?

If you’re refinancing a stabilized commercial property, the conduit vs portfolio lender decision is one of the most consequential choices you’ll make. Both can deliver competitive long-term financing, but they operate on fundamentally different models. A conduit lender originates your loan to sell it — pooling it with others into a commercial mortgage-backed security (CMBS) and passing it to bond investors. A portfolio lender — typically a bank, credit union, or life insurance company — keeps your loan on its own balance sheet and lives with it for the full term.

That single difference drives everything else: pricing, leverage, recourse, prepayment penalties, and how flexible the lender can be if your plans change mid-loan. The decision usually comes down to a trade-off between maximum proceeds and non-recourse protection (conduit) versus flexibility and a relationship you can pick up the phone and call (portfolio). This guide breaks down both so you can choose with confidence.

Quick Comparison Table

Here’s the side-by-side view most borrowers are looking for. Figures reflect typical market terms for stabilized commercial properties as of mid-2026; your actual quote will depend on property type, market, leverage, and sponsor strength.

Feature	Conduit (CMBS)	Portfolio Lender
Typical rate range	~6.00% – 7.00% fixed	~6.25% – 7.50% (banks); low-leverage life company deals can price below both
Max LTV	Up to 75%	Typically 65% – 75%; life companies often cap at 65%
Loan term	5, 7, or 10 years fixed	3 – 10 years fixed, sometimes with rate resets
Amortization	25 – 30 years; interest-only common	20 – 25 years; interest-only less common
Recourse	Non-recourse (standard carve-outs)	Often full or partial recourse at banks; life companies frequently non-recourse
Prepayment	Defeasance or yield maintenance — expensive and rigid	Step-down (e.g., 5-4-3-2-1) or negotiable; sometimes none
Minimum loan size	Usually $2M+	Can go well below $1M
Post-closing flexibility	Low — serviced by a third party, hard to modify	High — one decision-maker who holds the loan
Closing timeline	45 – 90 days	45 – 75 days; relationship deals can move faster
Best for	Max proceeds, long-term hold, non-recourse, cash-out	Flexibility, smaller loans, possible sale/refi before maturity, relationship banking

If you’re weighing a refinance more broadly — not just which lender type — our commercial mortgage refinancing guide walks through the full process from payoff quote to closing.

Deep Dive – Each Option Explained

Conduit (CMBS) Loans: How They Work

A conduit loan is originated by an investment bank or specialty lender with the intent to securitize it. Your loan gets pooled with dozens of others, sliced into bonds, and sold to institutional investors. Because pricing is tied to what bond buyers will pay rather than a bank’s cost of deposits, conduit lenders can often offer lower fixed rates and higher leverage than balance-sheet lenders — especially for property types banks are cautious on, like hospitality or older office.

The standard conduit structure is a 10-year fixed-rate term with 25- to 30-year amortization, and full or partial interest-only periods are common for stronger deals. Loans are non-recourse with standard “bad-boy” carve-outs, meaning your personal assets are protected unless you commit fraud, file a voluntary bankruptcy, or trigger similar carve-out events. Conduit lenders are also notably generous on cash-out refinances — if the appraisal and debt service coverage support it, they’ll let you pull equity that many banks would balk at.

When conduit wins: you want maximum proceeds, a long fixed term, non-recourse protection, or significant cash-out; your property is stabilized with a solid rent roll; you plan to hold through the full loan term.

When conduit loses: you might sell or refinance early — defeasance can cost hundreds of thousands of dollars when rates have fallen; your loan is under $2 million; you value flexibility, because once securitized, your loan is managed by a master servicer with little authority to modify anything. Getting approval for a lease amendment, a partial release, or an ownership transfer can be slow and expensive.

Portfolio Loans: How They Work

A portfolio lender funds your loan with its own capital — deposits at a bank or credit union, policyholder premiums at a life insurance company — and holds it to maturity. Because the lender keeps the risk, it underwrites to its own standards rather than to securitization guidelines. That cuts both ways: portfolio lenders can be more conservative on leverage and often require personal guarantees, but they can also make judgment calls no conduit desk ever could — crediting a strong banking relationship, getting comfortable with a quirky property, or restructuring terms if your situation changes.

Bank portfolio loans typically run 5 to 10 years with 20- to 25-year amortization, sometimes structured as a longer term with a rate reset at year 5 or 7. Prepayment penalties are usually a declining step-down (5-4-3-2-1 is common) and are frequently negotiable — some banks will waive the penalty entirely if you sell the property or keep the refinance in-house. Life insurance companies are the premium tier of portfolio lending: for low-leverage deals (65% LTV or less) on quality assets, they offer long fixed terms, non-recourse structures, and rates that can undercut conduit pricing.

When portfolio wins: you may sell or refinance before maturity; your loan is smaller than conduit minimums; your deal has a story that needs a human underwriter; you want one decision-maker to call when something changes; you’re a low-leverage borrower who qualifies for life company pricing.

When portfolio loses: you need leverage above 70–75%; you want a large cash-out; you can’t or won’t sign a personal guarantee; your property type is out of favor with local banks.

Rate Comparison

As of mid-2026, conduit loans on stabilized commercial properties are generally pricing in the 6.00% to 7.00% range for 10-year fixed terms, while bank portfolio loans are typically quoting 6.25% to 7.50% on 5- to 10-year money. Life insurance companies, competing only for low-leverage institutional-quality deals, can price at or below the bottom of the conduit range. These are market ranges, not offers — actual pricing depends on your property, market, leverage, and sponsorship.

What drives the difference:

• Benchmark and spread. Conduit loans price off the 10-year Treasury or swap rate plus a spread set by CMBS bond investor demand. Portfolio loans price off the lender’s cost of funds — deposits for banks, the Federal Home Loan Bank advance rate, or internal return targets for life companies.
• Leverage. The rate gap narrows or inverts at low leverage. At 60% LTV, a life company or aggressive bank may beat any conduit quote. At 75% LTV with cash-out, conduit usually wins on both rate and proceeds.
• Property type and market. CMBS investors will price hospitality, self-storage, and secondary-market deals that many banks avoid, which effectively gives conduit a rate advantage on those assets — the bank alternative may be a full point higher or unavailable.
• The all-in cost picture. A conduit loan’s lower headline rate can be erased by defeasance if you exit early, plus higher legal and servicing costs at closing. Always compare total cost over your realistic hold period, not just the note rate.

Before you compare quotes, run your numbers. Our DSCR calculator will show you the debt service coverage ratio lenders will underwrite you at — most conduit and portfolio lenders want to see 1.25x or better — and our commercial mortgage calculator lets you compare monthly payments across different rate, term, and amortization scenarios side by side.

How to Decide

There’s no universally better option — there’s a better option for your specific hold plan, leverage need, and risk tolerance. Four criteria settle most cases:

• Hold period. Choose conduit if you’re confident you’ll hold the property for the full 10-year term — you’ll lock a competitive fixed rate and never pay the prepayment penalty. Choose portfolio if there’s a realistic chance you’ll sell or refinance within 3 to 5 years; a step-down prepay costs a fraction of defeasance.
• Recourse tolerance. Choose conduit (or a life company) if non-recourse is non-negotiable — protecting personal assets is a legitimate reason to accept CMBS rigidity. Choose portfolio if you’re comfortable signing a guarantee in exchange for flexibility and, often, faster execution.
• Leverage and cash-out. Choose conduit if you need 70–75% LTV or a meaningful cash-out refinance; CMBS underwriting is built for proceeds. Choose portfolio if you’re at 65% LTV or below — you unlock the best portfolio pricing and give up little on proceeds.
• Need for flexibility. Choose portfolio if your business plan involves anything a servicer would need to approve mid-loan: repositioning, adding or releasing collateral, restructuring the rent roll, or transferring ownership interests. Choose conduit if the property is stabilized, the plan is simple, and you just want set-it-and-forget-it financing.

If you land on the fence — say, a 5-to-7-year expected hold at 70% LTV — get quoted both ways. The spread between your best conduit quote and your best portfolio quote, measured against your realistic exit date, will usually make the decision for you.

Frequently Asked Questions

What is the main difference between a conduit and a portfolio lender?

A conduit lender originates your loan to securitize and sell it as part of a CMBS bond, while a portfolio lender keeps your loan on its own balance sheet until maturity. Because conduit loans answer to bond investors, they offer standardized terms, non-recourse structure, and competitive fixed rates — but almost no flexibility after closing. Portfolio lenders control their own loans, so they can negotiate terms, modify loans mid-stream, and lend on deals that don’t fit a securitization box.

Are conduit loans cheaper than portfolio loans?

Often, but not always. Conduit loans typically carry lower fixed rates at higher leverage points, which is where they’re most competitive. At low leverage (65% LTV or below), life insurance companies and aggressive banks frequently match or beat conduit pricing. And the note rate isn’t the whole story — if you exit a conduit loan early, defeasance costs can wipe out years of rate savings. Compare all-in cost over your realistic hold period.

Can I pay off a conduit loan early?

Technically yes, but it’s expensive. Most CMBS loans require defeasance — purchasing a portfolio of government securities that replicates your remaining loan payments — or yield maintenance, a lump-sum penalty that makes the bondholders whole. Either can run into six or seven figures when interest rates have fallen since your closing. Most conduit loans do allow penalty-free prepayment during a short open window, typically the final 3 to 6 months of the term.

Do portfolio lenders require personal guarantees?

Usually, banks and credit unions do — full or partial recourse is standard for bank portfolio loans, though strong sponsors can sometimes negotiate burn-off provisions that reduce the guarantee as the loan seasons. Life insurance companies are the exception: they commonly offer non-recourse portfolio loans on lower-leverage, institutional-quality properties. If non-recourse matters to you but conduit rigidity doesn’t appeal, a life company loan is often the best of both worlds.

How can RefiLoop help with Conduit vs Portfolio?

RefiLoop connects you to 7,000+ lenders — including conduit originators, banks, credit unions, and life insurance companies. We pre-screen your deal against current lender appetites to find the best match for your property type, leverage, and hold plan, so you’re comparing real quotes from lenders who actually want your deal instead of cold-calling one bank at a time.

—

The conduit vs portfolio decision ultimately hinges on details a rate sheet can’t capture — your exit timeline, your recourse tolerance, and how much proceeds you actually need. The fastest way to get a real answer is to see real numbers side by side. Compare your options across RefiLoop’s 7,000+ lender network and get a custom quote matched to your property and your plan — click Compare My Options to get started.