Start Your Application
Start Your Application

How Current Rate Drops Are Creating Opportunities in Non-Conforming Commercial Real Estate Loans

How Current Rate Drops Are Creating Opportunities in Non-Conforming Commercial Real Estate Loans

The Federal Reserve has been on a rate-cutting trajectory, bringing the federal funds rate down to a range of 3.50% to 3.75% after three consecutive cuts to close out 2025. For commercial real estate investors and business owners who rely on non-conforming loan products, this shift in monetary policy is creating significant opportunities—if you know where to look.

What the Fed's Rate Cuts Mean for Commercial Real Estate

After more than a year of elevated borrowing costs that squeezed cash flow and sidelined many investors, the Fed’s recent actions are providing much-needed relief. The central bank slashed rates by 175 basis points since September 2024, signaling a pivot from fighting inflation to supporting economic activity.

For commercial real estate, this translates to:
• Improved cash flow coverage as debt service payments decrease
• Increased liquidity across the financial system
• Better refinancing opportunities for maturing loans
• Narrowing bid-ask spreads that had stalled transactions

According to industry analysts, approximately $1.2 trillion in commercial mortgages will mature over the next two years. The rate cuts make navigating this refinancing wave considerably less treacherous for property owners.

Why Non-Conforming Loans Are Thriving in This Environment

Non-conforming commercial loans—including bridge loans, hard money, and DSCR (Debt Service Coverage Ratio) loans—have become essential financing tools for investors who need flexibility that traditional bank financing can’t provide.

The Non-Conforming Advantage

Unlike conventional loans that require extensive income documentation and strict underwriting criteria, non-conforming products focus on:

• Property-level cash flow rather than personal income verification

• Speed to close (often 10-14 days versus 45-60 for traditional financing)

• Flexibility for unique property types including mixed-use, value-add, and transitional assets

• Higher leverage options for experienced investors

With banks tightening lending standards amid economic uncertainty, non-conforming lenders have stepped in to fill the gap. Bridge loan volume increased 25% between January 2023 and January 2024, and that growth trajectory continues as investors seek alternatives to traditional financing.

Current Rate Landscape for Non-Conforming CRE Loans

Here’s what investors can expect across different non-conforming loan products as of December 2025:

Loan Type Current Rates Typical Terms Best For
DSCR Loans 6.5% – 8.5% 30-40 years Rental properties qualified on property income
Bridge Loans 8% – 12% 6-36 months Acquisitions, value-add, stabilization
Hard Money 7.5% – 14% 12-24 months Quick closings, complex situations
DSCR loan rates have declined from an average of 8.73% in early 2024 to approximately 7.47% today—a direct benefit of the Fed’s rate-cutting cycle.

How Rate Cuts Specifically Benefit Non-Conforming Borrowers

1. Lower Floating Rate Payments
Many non-conforming loans are tied to indices like SOFR (Secured Overnight Financing Rate), which directly correlates with Fed policy. As the Fed cuts rates, SOFR declines, reducing monthly payments for borrowers with adjustable-rate products.

2. Improved Exit Strategies
Bridge loan borrowers typically plan to refinance into permanent financing once their property is stabilized. Lower rates make those exit refinances more attractive and easier to qualify for, reducing the risk of being stuck in short-term, high-cost debt.

3. Enhanced Property Values
As rates fall, cap rates tend to compress. Industry experts project cap rate compression of 50 to 100 basis points for stable, income-generating properties. This means investors who purchased during the high-rate environment may see meaningful appreciation as financing conditions improve.

4. Increased Lender Competition
With rate cuts signaling economic support, non-QM lenders are expanding their offerings. Many have introduced tiered pricing based on DSCR bands, rate buydown options, and rehab escrow allowances. More competition means better terms for borrowers.

Sectors Poised to Benefit Most

Multifamily: Elevated mortgage rates have pushed more renters into the market, driving strong absorption. Investors who financed multifamily projects with floating-rate debt can now refinance at significantly lower costs.

Industrial & Logistics: E-commerce and reshoring trends continue to fuel demand. Properties with stable tenants and long-term leases are particularly attractive to non-conforming lenders.

Value-Add Opportunities: Properties requiring repositioning or renovation are ideal candidates for bridge financing. With improved exit conditions, more investors are willing to take on these projects.

Mixed-Use Properties: Non-conforming lenders have historically been more flexible with mixed-use assets. As retail and residential components stabilize, these properties are gaining renewed interest.

Key Considerations for Investors

While rate cuts create opportunities, smart investors should keep these factors in mind: • Underwrite conservatively. Don’t assume further cuts are guaranteed. The Fed has signaled a slower pace of reductions in 2026.

• Focus on cash flow. Properties should generate positive returns from day one. Relying solely on appreciation or future rate drops is risky.

• Work with experienced lenders. Non-conforming financing requires expertise. Partner with lenders who understand your property type and investment strategy.

• Watch for prepayment penalties. Some non-conforming loans carry significant prepay penalties. Understand your exit costs before signing.

• Monitor DSCR requirements. Even as rates fall, lenders are paying closer attention to debt service coverage. A DSCR of 1.25 or higher positions you for the best terms.

The Bottom Line

The Fed’s rate cuts are reshaping the commercial real estate financing landscape, and non-conforming loan products are at the forefront of this transformation. For investors who need speed, flexibility, and creative solutions, products like DSCR loans, bridge financing, and hard money offer pathways to capitalize on today’s market conditions. At NewCenturyMortgages, we specialize in non-conforming commercial real estate financing solutions tailored to your investment goals. Whether you’re acquiring a new property, refinancing existing debt, or funding a value-add project, our team can help you navigate the current rate environment and secure competitive terms.

Additional Resources

• J.P. Morgan: How Interest Rate Cuts Impact Multifamily Real Estate jpmorgan.com/insights/real-estate/commercial-term-lending/interest-rate-cuts-impact-on-multifamily-r eal-estate

• Commercial Observer: Fed’s Third Straight Rate Cut commercialobserver.com/2025/12/fed-interest-rate-cut-2/

• Multi-Housing News: Why the Fed Rate Cut’s a Game Changer for CRE multihousingnews.com/why-the-fed-rate-cuts-a-game-changer-for-cre/

• Avison Young: Navigating the Fed’s Latest Move avisonyoung.us/what-federal-rate-cuts-could-mean-for-cre

• CoStar: Fed Rate Reduction Could Boost Commercial Real Estate costar.com/article/1383366984/fed-rate-reduction-could-boost-commercial-real-estate

Meet Jennifer Cabrera

From the energy capital of the world to the sun-soaked shores of South Florida, Jennifer Cabrera has built a career that most loan originators can only dream of. A Houston native now calling Miami home, Jennifer has spent over 30 years mastering the art and science of commercial mortgage lending.

Her journey began at Novastar Financial, where she didn’t just learn the ropes—she dominated them. Year after year, Jennifer ranked among the company’s top three loan originators, a testament to her relentless work ethic and natural ability to connect with clients.

Today, Jennifer serves as CEO of Atlantic Union Inc., where she and her team excel in providing commercial private lending solutions tailored for high-net-worth clients, both consumers and investors. With over five years at the helm, she has honed a niche in wholesale lending, offering unsecured business operating capital to empower her clientele. It’s the kind of specialized expertise that only comes from decades of navigating the complexities of commercial finance.

In tandem with her role at Atlantic Union, Jennifer has launched NewCenturyMortgages (NCM)—an AI-powered lending platform where commercial real estate and technology collide. Purpose-built for serious investors, NCM was born from a simple idea: investors shouldn’t have to jump through hoops to get funded, and brokers shouldn’t have to wait months to see a commission check. Powered by AI and built for speed, NCM specializes in DSCR loans, portfolio financing, commercial real estate, and asset-based lending. Forget the paperwork. No income verification.

Armed with an MBA in Finance and Wealth Management from Purdue University and lending licenses in both California and Florida, Jennifer brings a rare combination of academic rigor and real-world expertise to every transaction. Whether structuring complex deals for seasoned investors or providing the capital that helps businesses grow, her clients know they’re in capable hands.

But Jennifer’s impact extends far beyond the closing table. As an active volunteer with the Junior League of Miami, she’s deeply committed to giving back to the community that has embraced her. And when she’s not leading Atlantic Union or serving her community, you’ll likely find her exploring a new corner of the world—because after three decades of hard work, she’s earned every stamp in that passport.

Kim Tillinghast

Principal, Partner

Kim Tillinghast began her career in the banking industry in 1985. She graduated with a degree in Finance from West Texas State University in 1990 and has continued her education by earning her Series 24 General Securities Principal Exam and Certified Plan Fiduciary Advisor (CPFA™). Shortly thereafter she started her brokerage career at a traditional wirehouse in downtown Los Angeles, California in 1991. After relocating to Orange County, Kim became an independent financial advisor in May of 1993. She brings over 37 years in the banking and finance industry with experience ranging from designing, developing, employing and maintaining complex investment strategies, Pension Plans, Employee Stock Option Plans, Corporate Finance, Estate Planning and Transition. Outside of her career, she served as Co-Chair of the Dallas County Susan G. Komen Race for the Cure 2013 and 2014 and currently serves on the Board of the Tillinghast Society, Inc. With a deep love for animals, she continues to volunteer for multiple emergency animal response teams including Red Rover, HSUS, UAN, ASPCA and volunteers weekly at the Irving Animal Shelter. Kim also loves worldwide adventure travel and has many amazing experiences visiting almost half of the world’s countries and all seven continents, twice.

Karthik Muraliraj

CFP®, ChFC®, CLU®, RMA®, Partner

Karthik Muraliraj was raised in Fort Worth, Texas, and developed an interest in investing and economics at a young age. After graduating from the University of Texas at Austin with a Bachelor of Arts in Economics and a minor in Business, he started his career as a financial professional in 2008. Throughout his career, Karthik has continued to educate himself by gaining multiple designations. Since moving to Dallas, he has been an active member in the community—volunteering with organizations such as the network of Indian Professionals, Dallas Autumn Ball and Reading Partners. Karthik is an avid sports fan and enjoys supporting his alma mater as a proud member of the Texas Exes Dallas Chapter. In his free time, Karthik enjoys cooking, travel, fitness and spending time with this wife, son, dog, and cat.

Crystal Arredondo

MBA, CDFA®, CPFA™, Partner

Crystal Arredondo was born and raised in Germany. She moved to Texas following her parents’ decision to retire after serving an overseas career in the Armed Forces. Seeing firsthand the difficult transition to civilian life after retirement, Crystal obtained her MBA in Finance at the University of North Texas and began her career as a financial advisor. In 2009, she completed the Retirement Planning Specialist Program at the Wharton School of Business, University of Pennsylvania. In 2018, she earned her designation of Certified Divorce Financial Analyst® (CDFA®). In 2022, she earned the additional designation as a Certified Plan Fiduciary Advisor (CPFA™). As the daughter of an immigrant mother, she especially enjoys helping women and business owners make decisions that affect their financial independence. She served as the 2015-16 Chair for the National Association of Women Business Owners (NAWBO) and 2016-17 Chair for the NAWBO Institute of Entrepreneurial Development.

Philip Strunk

CFP®, CPA, Partner

Philip Strunk is a native of Houston, TX. Philip earned his Bachelor of Business Administration and Masters in Professional Accounting from the University of Texas at Austin’s McCombs School of Business. He earned his designation as Certified Public Accountant (CPA) in 2004 and CERTIFIED FINANCIAL PLANNER (TM) certification in 2010. Having started his career with Deloitte & Touche, LLP in 2005, Philip spent a year and a half in Deloitte’s Audit and Assurance Services group and provided a variety of financial services for a number of Fortune 500 companies. He decided in late 2006 that his talent and passion for investments were best suited for working with smaller groups and individuals. After obtaining the required securities registrations and insurance licenses, Philip became a financial advisor. The impact was plainly visible and more fulfilling. Philip serves as the Investment Director for MPACT.

John C. Farris

CAP®, CFS®, Partner

John C. Farris is a founding partner and has more than forty years in both public and private business serving in a variety of management and leadership capacities. John completed the Retirement Planning Specialist Program at the Wharton School of Business at the University of Pennsylvania earning the Retirement Planning Specialist designation. John and his family have a history of philanthropic giving through numerous non-profit organizations. John recently completed his designation as a Chartered Advisor in Philanthropy® (CAP®). He is also a member of The International Association of Advisors in Philanthropy. His primary goal is to help people give intelligently with love and thereby experience the true joy of helping others. John lives in Park Cities and has served on the Public Works Advisory Council, as finance director of the BSA West Park District, the BSA Troop 82 Executive Board, and as a BSA Assistant Scoutmaster for Troop 82, Dallas, Texas.