A loan maturity date does not wait for a good market. It arrives on the day written in the note, and on that day the owner pays off the balance, replaces it with a new loan, or sells the building to do one of those.
Most owners know their date. Fewer have priced all three paths before it arrives. This article shows one way to put hold, sell and refinance side by side, with a worked example you can follow with a pencil.
The numbers in the example are illustrative. Your rate, your rents and your lender’s terms will differ, which is exactly why the math is worth doing on your own building.
Why 2026 is a crowded year
You are not the only owner asking. According to the Mortgage Bankers Association, seventeen percent ($875 billion) of the $5.0 trillion of outstanding commercial mortgages held by lenders and investors is scheduled to mature in 2026.
That figure is national. It says nothing about your loan, your lender or your town. What it does say is that a great many owners face the same decision in the same year, and that starting early, with your own numbers, keeps the choice in your hands.
Three paths, defined plainly
With a loan coming due, “hold” cannot mean “do nothing”. The balance has to be paid or replaced. So the three paths look like this:
- Hold: keep the building and refinance only what you owe, or pay it down from cash.
- Refinance: keep the building and take a larger loan, pulling some equity out for another use.
- Sell: sell the building, pay off the loan and keep the net proceeds.
Each path has three parts: the cash it puts in your hand today, the cash flow it leaves you each year you own, and the risk you carry while you own. The work is putting those three parts in one table for each path.
Start with the value
Every path depends on what the building is worth, because lenders size loans against value and buyers pay from it.
For an income property, the core of that value is net operating income (NOI, the rent left after operating expenses) divided by a cap rate (the yield a buyer requires from that income). An NOI of $156,000 at an 8.0% cap rate is $1,950,000.
If you want to test a few cap rates against your own NOI, the cap rate calculator does the arithmetic. The harder part is the inputs. NOI should tie to the leases and the trailing twelve months of income and expense. The cap rate should be argued from comparable sales, not borrowed from a headline.
One building, three sets of numbers
Take a hypothetical owner of a 24,000 square foot flex building in Casper with four tenants. The figures are illustrative, chosen so the math is easy to follow. They are not a forecast of rates or values.
| Item | Figure |
|---|---|
| Net operating income | $156,000 a year |
| Cap rate from comparable sales | 8.0% |
| Value ($156,000 ÷ 0.08) | $1,950,000 |
| Loan balance due March 2027 | $1,050,000 |
For new debt, assume a lender offers 7.25% interest on a 25-year amortization, lends up to 65% of value, and requires NOI to cover the annual loan payments at least 1.25 times. That coverage test is the debt service coverage ratio, or DSCR.
Hold. Refinance the $1,050,000 balance. Annual payments at those terms come to about $91,100. DSCR is $156,000 ÷ $91,100 = 1.71. No cash comes out today. Cash flow after loan payments is about $64,900 a year.
Refinance. Borrow the most the lender allows: 65% × $1,950,000 = $1,267,500. Annual payments come to about $109,900. DSCR is $156,000 ÷ $109,900 = 1.42, which passes. After paying off the old loan, $217,500 comes out, less loan costs. Cash flow after loan payments drops to about $46,100 a year.
Sell. At $1,950,000, less selling costs assumed here at 4% ($78,000; use your broker’s actual quote), less the $1,050,000 payoff, you keep about $822,000 before taxes. The building’s cash flow ends.
| Path | Cash today | Yearly cash flow | DSCR |
|---|---|---|---|
| Hold | $0 | about $64,900 | 1.71 |
| Refinance | about $217,500, less costs | about $46,100 | 1.42 |
| Sell | about $822,000, before taxes | none | not applicable |
None of these rows is the right answer on its own. Each trades cash now against cash later and against risk.
Test what could go wrong
A single set of numbers hides the risk. The useful question is how each path holds up when something moves. For most small commercial owners, two tests matter most: the rate and a tenant.
The rate is a point higher. At 8.25% instead of 7.25%, annual payments on the hold loan rise to about $99,300 (DSCR 1.57). On the refinance loan they rise to about $119,900 (DSCR 1.30). Both still pass the 1.25 test in this example, but the refinance path has far less room.
The largest tenant leaves. Suppose that tenant pays $48,000 of the rent and the space sits empty for a year. NOI falls to $108,000 before any re-leasing costs.
- Hold: $108,000 ÷ $91,100 = 1.19. Tight, but the building still pays its loan.
- Refinance: $108,000 ÷ $109,900 = 0.98. The payments exceed the income, and the owner covers the gap from their own pocket.
- Sell: a buyer prices the empty space, so selling after the tenant leaves usually means selling for less.
This is why the lease schedule belongs next to the loan schedule. A large lease ending a few months before or after the maturity changes which path is safe.
What a lender will ask for
Whichever way you lean, gather the package early. Lenders and buyers ask for much the same paper, and a complete set saves weeks.
- Every lease, with all amendments and side letters
- A current rent roll that matches those leases
- A trailing twelve months of income and expense, plus prior year statements
- The current property tax notice and insurance declarations
- The existing loan documents, including any prepayment terms
- A list of capital work done in the last five years and work you know is coming
If the rent roll and the leases disagree, fix that before anyone else finds it. A mismatch found by a lender’s underwriter costs more time than one found by you.
Questions only you can answer
The spreadsheet does not decide everything. A few questions belong to the owner and their own advisors.
- How long do you want to own? A five-year horizon and a twenty-year horizon point to different paths.
- What would the cash do? Cash out of a refinance or a sale is only worth something if it has a job.
- What does a sale cost in taxes? That is a question for your CPA, before you list.
- What are you signing personally? Whether a new loan makes you personally liable is a question for your attorney.
Clover State prices the real estate and recommends a path for the building. Where the money goes afterward, and the tax and legal consequences, sit with your CPA, your attorney and any financial advisor you use.
A timeline that keeps choices open
The later you start, the fewer paths remain. A loan that matures next spring is a decision for this winter. Here is a calendar we suggest, counted back from the maturity date.
- Nine months out: price the building, read every lease and list the gaps in the paperwork.
- Seven months out: run all three paths, with the rate and tenant tests above.
- Six months out: choose a path and approach lenders or brokers with a complete package.
- Three months out: compare term sheets or offers against your own numbers.
- One month out: close, or use the time you saved to fall back to the second path.
An owner who starts at nine months can still change course at three. An owner who starts at two months usually takes the first term sheet that arrives.
How the full analysis works
Our hold, sell or refinance analysis runs the example above on your actual building, carried forward five years. It includes loan paydown, the lease schedule, an assumed value at the end of the period, and a sensitivity table for rate, vacancy and cap rate. It ends in a written recommendation, with the reasons and the risks set down plainly.
It is a fixed fee, from $3,000 per property, delivered in 10 business days from complete documents. It sits inside our portfolio management work, which is advisory: we do not broker the sale, arrange the loan or earn anything from whichever path you choose. The method is the same four steps described on our approach page, and every fee is listed on the pricing page.
Before your maturity date
If a loan on one of your buildings matures in the next year, the cheapest time to price your options is now. Book a free 30-minute scoping call and we will tell you what the hold, sell or refinance analysis needs from you, what it costs for your building and when you would have the answer.
