Costs
Commercial real estate loan down payments by owner occupancy and loan program
Commercial real estate loan down payments sorted by owner occupancy and loan program, with cash needed on a $2 million purchase and the closing costs that follow.
What to take away
- Commercial real estate loan down payment ranges run from about 10% on an owner-occupied SBA 504 project to 35% or more on a special purpose investment building.
- Owner occupancy is the largest single discount in the market.
- The down payment is one one-off cost, and closing costs add roughly 3% to 6% on top.
- Recurring costs decide whether the building pays for itself, not the down payment.
- A thinner down payment usually buys a higher rate.
Down payment is not a figure a broker can quote from memory. It moves with three things: who uses the building, which program funds it, and how a lender reads the risk.
A dentist buying her own office and a fund buying a strip center two blocks away face down payments 20 percentage points apart on the same street.
Down payment by property use and program
The table below shows ranges U.S. lenders quoted in the third quarter of 2026. Every figure is illustrative; final terms turn on the appraisal and the borrower's record.
Down payment by property use
Property use and program
- Owner-occupied, SBA 504
- 10% to 15%
- Owner-occupied, SBA 7(a)
- 10% to 20%
- Owner-occupied, conventional bank
- 15% to 25%
- Investment property, bank or credit union
- 25% to 30%
- Investment property, CMBS conduit
- 30% to 35%
- Special purpose building
- 30% to 40%
- Multifamily, agency loan
- 20% to 35%
Down payment range
- Owner-occupied, SBA 504
- $200,000 to $300,000
- Owner-occupied, SBA 7(a)
- $200,000 to $400,000
- Owner-occupied, conventional bank
- $300,000 to $500,000
- Investment property, bank or credit union
- $500,000 to $600,000
- Investment property, CMBS conduit
- $600,000 to $700,000
- Special purpose building
- $600,000 to $800,000
- Multifamily, agency loan
- $400,000 to $700,000
Cash on $2M purchase
- Owner-occupied, SBA 504
- Owner-occupied, SBA 7(a)
- Owner-occupied, conventional bank
- Investment property, bank or credit union
- Investment property, CMBS conduit
- Special purpose building
- Multifamily, agency loan
| Property use and loan program | Down payment range | Cash needed on a $2,000,000 purchase |
|---|---|---|
| Owner-occupied, SBA 504 | 10% to 15% | $200,000 to $300,000 |
| Owner-occupied, SBA 7(a) | 10% to 20% | $200,000 to $400,000 |
| Owner-occupied, conventional bank | 15% to 25% | $300,000 to $500,000 |
| Investment property, bank or credit union | 25% to 30% | $500,000 to $600,000 |
| Investment property, CMBS conduit | 30% to 35% | $600,000 to $700,000 |
| Special purpose building | 30% to 40% | $600,000 to $800,000 |
| Multifamily, agency loan | 20% to 35% | $400,000 to $700,000 |
Basis for the ranges: published SBA program guidelines plus the loan-to-value limits that banks, credit unions and conduit lenders set in their own credit policy. Treat them as planning figures rather than quotes.
The ranges above are U.S. figures. Canadian deals turn on CMHC insurance for multifamily and on bank policy for owner-occupied property, so the same property use can price differently.
Program rules set a floor rather than a quote, and SBA 504 terms tie eligibility to owner occupancy, which is why that route sits lowest. The 7(a) program folds real estate into a broader loan and lets a lender size the mortgage differently.
Bank and conduit lenders sort deals by exit risk, and commercial property type drives that sorting more than the balance sheet does. Because each program weighs occupancy and cash flow on its own terms, SBA loans lenders resist a tidy ranking.
A 10% down payment is a program floor, not a quote.
One-off costs at closing
A borrower writing a $200,000 down payment check often wires $260,000 by the closing table. The difference sits in fees that arrive once.
One-off closing costs
- Origination or loan fee1% to 2% of loan amount
- Appraisal, survey and Phase I environmental report$4,000 to $15,000
- Title insurance and lender legal work$5,000 to $25,000
- SBA guaranty fee or CDC fee on government-backed loan
- Escrow reserves lender holds for taxes and insurance
On a $1.8 million loan, the items are typically:
- Origination or broker fee, usually 1% to 2% of the loan amount.
- Appraisal, usually $3,000 to $10,000 for a commercial building.
- Phase I environmental report, usually $2,000 to $5,000.
- Survey, property condition report and flood certification, usually $2,000 to $6,000.
- Title search, title insurance and recording fees, which scale with the loan amount.
- Borrower and lender legal fees, which vary by state and by deal.
- SBA guaranty fee on 7(a), or CDC and packaging fees on a 504 loan.
Those items land between roughly $60,000 and $110,000 on that loan. Most bank loans will not finance them, so the cash must exist before closing. SBA programs allow some fees to be rolled in, which raises the balance and the payment. Turning an application and repayment offer into one annual cost is how owners catch this before signing.
Recurring costs start with the first payment
As an illustration, a $1.8 million loan at 7.5% over 25 years runs about $13,300 a month, or $160,000 a year. The 7.5% rate is dated to the third quarter of 2026, not a lender quote, and it moves with the index.
Property taxes, insurance and replacement reserves commonly add $25,000 to $60,000 a year on a building that size. Lenders usually want net operating income to cover the total by 1.20 to 1.35 times.
Recurring costs on $1.8M loan
- $13,300Monthly debt service
- $160,000Annual debt service
- $25K–$60KAnnual taxes, insurance, reserves
- 1.20–1.35Required NOI coverage ratio
These recurring costs do not change the down payment, which is set once at closing. Comparing what a line of credit costs before the last cash goes into the down payment beats finding the gap in month four.
Example: a $2 million owner-occupied building
A two-tenant professional building appraises at $2,000,000 and the owner occupies 70% of it. Under a 504 structure the borrower puts down 10%, or $200,000, with a bank lien of $1,000,000 and a CDC debenture of $800,000.
Closing costs of 3% to 5% add $60,000 to $100,000, so cash at closing lands between $260,000 and $300,000. Debt service on $1,800,000 sits near $160,000 a year, and taxes and insurance add another $30,000. The rent roll has to clear roughly $190,000 before the owner takes a dollar.
A business kitting out the space can work through an equipment financing checklist before signing the real estate note, since fit-out money and closing money land in the same quarter.
Where the numbers move against you
Four things push required equity up in dollars even when the percentage looks settled.
- A startup or a borrower with under two years of trading history.
- A special purpose building with few alternative uses.
- An appraisal below the contract price, which widens the gap the buyer must fill.
- An environmental finding that needs remediation before closing.
Commercial mortgage rates are quoted as an index plus a spread, so the percentage down and the rate move together. An overlay can add five points of equity without changing the headline rate.
