Shorter Terms, Smarter Deals: The New Playbook for Multifamily Capital Markets
By Tyler Griffin, President of Mortgage Banking with Lument, New York.
The 10-year mindset is over.
As moderator of the “Shorter Terms, Smarter Deals” panel at MBA CREF26, I heard a consistent message from lenders across capital sources: multifamily borrowers are placing less value on long-term certainty and more on flexibility.
Loan terms are shortening, extension options are gaining importance, and capital stacks are being built with optionality at the center. The goal is no longer to lock in long-term debt at almost any cost. It is to preserve strategic flexibility in an environment where the cost of being wrong has increased.
The Reset: Duration and Optionality
What we are seeing is not defensive positioning. It is disciplined capital strategy. After several years of rate shocks, liquidity swings, and valuation recalibrations, both borrowers and lenders are underwriting uncertainty differently. Capital is demanding adaptability.
Five-year loans now represent a significant share of new production across banks, insurance companies, agencies, and private credit lenders. This marks a major shift from just a few years ago.
In 2020, five-year debt represented only a negligible share of Lument’s agency origination volume, while 10-year terms dominated production. By 2025, five-year loans had grown to account for roughly one-third of our volume, nearly matching 10-year terms. This underscores borrowers’ growing reluctance to lock in 10-year commitments at today’s rates. Instead, they want extension options, prepayment flexibility, and the ability to refinance or sell when conditions improve — features more likely to accompany floating-rate structures with shorter loan durations.
If SOFR declines in step with anticipated future Fed rate cuts, demand for short-term floating-rate structures will increase. On the other hand, many lenders also now offer shorter fixed-rate options that were uncommon five years ago, giving borrowers alternatives to traditional bridge financing.
But borrowers are not driving this change alone. Lenders are competing in areas that once had clearer boundaries, and the agencies, life companies, banks, and debt funds increasingly overlap. As a result, developers, investors, and owners expect lenders to provide multiple solutions rather than a single offering.
Liquidity Is Abundant, But Basis Remains a Constraint
Despite headlines about uncertainty, liquidity remains available and lenders are competing for well-located assets. The constraint is often cost basis — many assets were acquired or refinanced at peak valuations under compressed cap rates. Today, higher interest rates and tighter underwriting constrain loan sizing, with debt service coverage ratio (DSCR) and debt yield metrics reducing proceeds and, in some markets, cap rate expansion further pressuring values. As a result, refinancing proceeds can fall short of existing loan balances. Some borrowers are extending, others are recapitalizing, and a subset are selling to reset their cost basis. Rather than distress, the market is undergoing disciplined repricing.
Fundamentals will determine the specific outcome, with rent growth, concessions, and operating performance all influencing whether borrowers refinance, recapitalize, or sell. These metrics vary by market, as different MSAs are in very different innings of the market cycle. For example, Denver and Raleigh are still working through peak deliveries and lag Sunbelt metros further along the absorption curve. AI-driven coastal tech hubs such as the Bay Area and Seattle continue to rebound, while policy- and labor-constrained markets like Boston and the D.C. metro area may lag.
When rent growth resumes, improving fundamentals should narrow bid-ask spreads and unlock broad-based transaction activity. If rent growth remains muted, volume could still rise, but likely through selective portfolio reallocation as institutions recycle capital rather than extend hold periods. Such decisions reflect capital discipline rather than distress-driven selling.
Capital Mix and What Comes Next
The next four years will bring a wave of multifamily loan maturities from the low-rate period. In 2026, for instance, there is roughly $875 billion in CRE mortgages maturing, with multifamily making up more than one-third of that, according to the MBA. How that capital is refinanced will depend on the evolving lender landscape.
The agencies represent the fastest-growing segment of maturing multifamily debt and are well-positioned to capture an outsized share of refinancing activity with expanded caps and a shift toward shorter-term structures. Banks continue to get aggressive for relationship-driven business, while insurance lenders are expanding their capabilities as strong annuity inflows provide additional capital for commercial lending. Private credit continues to fill gaps where complexity or leverage exceeds traditional lending standards.
Real estate cycles reward discipline over time. For multifamily owners, the path forward is straightforward: protect flexibility, manage cost basis, and focus on strong fundamentals. Careful loan structuring today will determine who is best positioned when long-term, lower-cost capital becomes available again.
(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
