How Apartment Loan Rates Are Priced: Index Plus Spread, Explained
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Most apartment loan rates are built from two parts: an index and a spread. Fixed rate loans are usually priced off a U.S. Treasury yield with a term close to the loan's (for example the 10 year Treasury for a 10 year loan) plus the lender's spread. Floating rate loans are priced off SOFR (the Secured Overnight Financing Rate) plus a fixed margin. The index moves with the market and nobody controls it. The spread depends on the loan's risk and the lender's appetite: leverage, debt service coverage, the property's quality and market, the borrower and the program. A quarter point of spread on a $7,000,000 loan is $17,500 a year of interest.
This post is part of our guide to real estate syndication. It explains each part, what moves it and how to compare quotes. Figures are as of November 2026; the rates in the example are illustrations, not quotes.
The two parts
| Part | Fixed rate loan | Floating rate loan |
|---|---|---|
| Index | Treasury yield of similar term, set at rate lock | SOFR, reset each period over the loan |
| Spread | Set by the lender at application, sometimes confirmed at lock | Set in the loan documents for the term |
| Floor | Sometimes a minimum all-in rate | Often an index floor |
| Protection against index rises | Built in once locked | An interest rate cap, bought by the borrower |
SOFR is published daily by the Federal Reserve Bank of New York. For how the two rate types compare for a business plan, see bridge vs agency loans; for the cap, see interest rate caps.
What moves the spread?
- Leverage. A lower loan-to-value means less risk and usually a tighter spread.
- Coverage. A higher debt service coverage ratio does the same. See DSCR loans.
- The property. Age, condition, location, size and occupancy.
- The program. Agency, bank, CMBS, life company and bridge lenders price differently. See bridge vs agency loans.
- Mission or affordability features. Some agency programs price better for affordable or green properties; ask your lender.
- The borrower. Experience, net worth and liquidity of the sponsor and any key principal. See loan guarantors.
- Term and prepayment. A longer term, more flexible prepayment or a longer interest-only period can cost spread.
A worked example: what the parts cost
A sponsor gets two quotes for a $7,000,000, 10 year fixed rate loan on the same day. The 10 year Treasury yield is 4.25% in this example.
| Quote | Spread | Rate | Yearly interest (interest only) | Difference over 10 years |
|---|---|---|---|---|
| Lender A | 1.75% | 6.00% | $420,000 | none |
| Lender B | 2.00% | 6.25% | $437,500 | $175,000 more |
Lender B's quarter point costs $17,500 a year, or $175,000 over the term, before any compounding. It can also shrink the loan: when the DSCR test sets the amount, a higher rate supports less debt. See DSCR loans and loan sizing.
Lender B may still be the better loan if it lends more, charges fewer points, has a lighter prepayment penalty or closes with more certainty. See sources and uses and prepayment penalties.
When is the rate set?
On a fixed rate loan, the index is set when you lock the rate, often after the lender's approval and before closing. Between the quote and the lock, the index can move either way, and a rise raises your rate even if the spread holds. Some lenders offer an early rate lock for a deposit. Underwrite the deal at a rate above the quote to leave room. See the apartment loan timeline and rate lock.
How to compare quotes
- Get every quote on the same day, so the index is the same.
- Write each as index + spread, plus points and fees.
- Compare loan amounts under each lender's sizing tests.
- Compare prepayment terms against your hold period.
- Compare recourse, reserves and the lender's track record for closing.
How DoorRaise fits in
DoorRaise does not lend or arrange loans. It helps sponsors raise the equity for apartment buildings with 5 or more units from their friends and followers, and computes the deal page's projections from the sponsor's loan terms. DoorRaise forms the deal's LLC, prepares the offering documents, files Form D and verifies every investor's accreditation, in 506(b) and 506(c) deals, before they can sign or wire. Investors fund by wire into escrow at Enterprise Bank & Trust. DoorRaise charges two flat fees: $1,500 to set up (non-refundable) and $5,000 a year for administration, the first year paid at closing from the money raised and only if the deal closes.
Test your loan at a higher rate with the free cap rate and DSCR calculator, then start your deal.
FAQ
How are multifamily loan rates determined?
Usually as an index plus a spread. Fixed rate loans use a Treasury yield of similar term; floating rate loans use SOFR. The spread reflects the loan's risk and the lender's pricing.
What is a loan spread?
It is the amount a lender adds to the index to set the rate, expressed in percentage points or basis points (1 basis point = 0.01%).
Can I negotiate the spread on an apartment loan?
Often, by comparing lenders and by improving the loan's risk: lower leverage, higher coverage, a stronger sponsor team or a different program.
When is the interest rate locked?
On fixed rate loans, at the rate lock, usually after approval and before closing. Until then the index can move.
Why do two lenders quote different rates on the same day?
The index is the same, so the difference is the spread, which reflects each lender's program, cost of money and view of the risk.
Sources
- Federal Reserve Bank of New York, Secured Overnight Financing Rate data
- Fannie Mae Multifamily, fixed-rate mortgage loans
- Freddie Mac Multifamily, fixed-rate loan term sheet
This article is general information, not legal, tax or investment advice. The example loans and rates are illustrative. DoorRaise is not a lender, law firm, broker-dealer, investment adviser or funding portal.