A $2.72 million commercial real estate loan at 6.5% fixed costs $220,000 annually with a 1.25 debt-service ratio. The same loan at 5.75% floating drops to $205,000 and a 1.34 ratio, adding $15,000 yearly cash flow.
Let me put real numbers on it, using the building we have been working with all series. Lender income of $275,200 and a loan of $2.72 million. At a fixed 6.5%, your annual payment is about $220,000, and your coverage ratio sits right at 1.25. Now say the lender offers floating at 5.75%. Your payment drops to about $205,000. Your coverage improves to 1.34— that is real money, roughly $15,000 a year.
