Benefits of Life Insurance Company Loans for CRE Investors Amid Market Volatility

By Ryan McGuire, Analyst

These past few weeks have seen the financial markets embark on a rollercoaster ride of economic uncertainty, geopolitical risk, and troubled consumer sentiment. The knock-on effects of these events is felt in real estate through treasury yields – the index on which most lending is based. Yields on the 5 and 10-year US treasuries spiked again last week before leveling out, forcing lenders to take a cautious approach to new debt originations. When debt markets grow cautious, credit spreads widen to reflect the increase in perceived risk, resulting in the continuation of the high interest rate environment that borrowers have been dealing with. While these issues aren’t unique to upstate New York, Largo Capital can help investors in the market navigate the complex process of choosing the best lender for refinancing, acquisition, or construction.

In times of uncertainty, finding the best lender for your real estate investments can protect you from some of these external factors. As a mortgage banking firm with over 35 years of history in the market, Largo Capital has access to a number of different lending sources that help to ensure you secure the most competitive financing available today. We are particularly proud to represent 27 correspondent life insurance companies, offering highly competitive lending programs for all real estate asset classes. For borrowers who are not focused on maximum leverage, the best financing options are often presented by life insurance companies.

Benefits of Life Company Financing

1. Competitive Spreads: Life companies generally offer low and competitive credit spreads, particularly for high-quality, stabilized properties. Their cost of capital is lower than banks because they manage long-dated liabilities (e.g., life insurance policies), so long-term real estate loans align well with their investment goals.
2. Long-Term Fixed Rate Financing: Life companies typically offer fixed-rate loans with terms of 5 to 30 years, which provides predictable debt service and hedges against interest rate risk. This is especially valuable for long-hold assets like industrial, multifamily, or office properties.
3. Rate Lock at Application: Unlike banks that lock rate at commitment or CMBS loans that lock rate at closing, life companies offer the ability to lock in an interest rate at application. This not only provides protection from interest rate risk, shielding borrowers from unexpected changes in treasury yields, but also offers peace of mind throughout the process.
4. Non-Recourse: Most life company loans are non-recourse, meaning the borrower is not personally liable beyond the collateral (with standard carve-outs). This limits personal financial exposure for the borrower.
5. Certainty of Execution: Life companies bring strong capitalization and reliability to the table, especially when financing stabilized, institutional-quality properties. After they commit to a deal, they rarely retrade loan terms, and their underwriting process tends to follow a more consistent and predictable path than banks or CMBS lenders.
6. In-House Servicing: Largo Capital services the loans that we originate for life companies, allowing us to stay involved throughout the life of the loan. Our award-wining servicing department acts as a liaison between lenders and borrowers, tracking loan covenants, preparing and submitting borrower requests, monitoring real estate taxes & insurance payments, and much more.