The short answer: It depends on your hold plan and the prepayment structure far more than on coupon. On October 15, 2026, the U.S. Treasury's daily par yield curve put the 5-year at 4.91%, the 7-year at 5.00% and the 10-year at 5.10%, so a shorter term saves less than a fifth of a point at equal spreads. Against that, Freddie Mac's April 2026 fixed-rate and floating-rate term sheets cap terms of five to under seven years at 75% loan-to-value instead of 80%, its fixed-rate loans carry yield maintenance or defeasance until the final 90 days, and a 5-year term leaves the least principal paid before the balloon. Pick the term that ends after your planned sale or refinance, and float if that date is uncertain.
How much coupon does a shorter agency term save today?
A shorter agency term saves very little coupon today, because the Treasury curve was only gently upward sloping on October 15, 2026: the 5-year yielded 4.91%, the 7-year 5.00% and the 10-year 5.10%, so at an equal spread a 5-year loan saves about 0.19 points a year over a 10-year.
5-year Treasury, October 15, 2026 (U.S. Treasury): 4.91% 7-year Treasury, October 15, 2026 (U.S. Treasury): 5.00% 10-year Treasury, October 15, 2026 (U.S. Treasury): 5.10% 5-year Treasury, October 20, 2026 (U.S. Treasury): 4.94% 10-year Treasury, October 20, 2026 (U.S. Treasury): 5.12%
In dollars, the gap is small (our arithmetic). On a $12.4 million loan, 0.19 points is about $23,560 a year of interest between the 5-year and the 10-year, and the 0.10-point gap between the 7-year and the 10-year is about $12,400 a year. The term sheets do not publish spreads, so the equal-spread assumption is ours; a quote can widen or narrow the gap by term.
The lower coupon barely moves proceeds either. Agency loans are sized on a 1.25x minimum amortizing debt coverage ratio (DCR) on Freddie Mac's sheets, and at an illustrative 1.60% spread a building with $1.2 million of net cash flow supports about $12.64 million on a 5-year term against about $12.40 million on a 10-year (our arithmetic), roughly 2% more. Freddie Mac's Index Lock lets an eligible borrower lock the Treasury index after a signed application, whichever term you choose.
What does each term do to LTV and prepayment?
Term changes leverage and exit cost more than coupon: Freddie Mac's April 2026 fixed-rate and floating-rate sheets cap terms of five to under seven years at 75% LTV against 80% for seven years and longer, and a fixed-rate loan carries yield maintenance or defeasance until its final 90 days.
Minimum amortizing DCR, every term (Freddie Mac, 4/26): 1.25x Maximum LTV, 5-year to under 7-year term (Freddie Mac, 4/26): 75% Maximum LTV, 7-year term and longer (Freddie Mac, 4/26): 80% Maximum LTV, full-term interest-only (Freddie Mac, 4/26): 65% through the 7-year term, 70% above it Fixed-rate terms (Freddie Mac, 4/26): 5 to 10 years Floating-rate terms (Freddie Mac, 4/26): 5, 7 and 10 years, indexed to 30-day Average SOFR
The 75% cap only costs you money when LTV is the binding test. On a $20 million building it is a $1.0 million difference in maximum proceeds, which matters for a property valued at a high cap rate and not at all for one where coverage binds first.
Prepayment is where the terms really differ. Freddie Mac's fixed-rate sheet lists yield maintenance until the loan is securitized, followed by a 2-year lock-out and defeasance thereafter, with no prepayment premium in the final 90 days; if the loan is not securitized within the first year, yield maintenance applies until the final 90 days. Leaving a fixed loan early is priced off rates at payoff, so the cost is unknown when you sign.
The floating-rate sheet offers four published schedules instead, each with no premium in the last 90 days of the term:
| Floating prepayment premium (Freddie Mac, 4/26) | Option 1 | Option 2 | Option 3 | Option 4, 10-year capped only |
|---|---|---|---|---|
| Floating prepayment premium (Freddie Mac, 4/26) Year 1 | Option 1 Locked out | Option 2 3% | Option 3 5% | Option 4, 10-year capped only 7% |
| Floating prepayment premium (Freddie Mac, 4/26) Year 2 | Option 1 1% | Option 2 2% | Option 3 4% | Option 4, 10-year capped only 6% |
| Floating prepayment premium (Freddie Mac, 4/26) Year 3 | Option 1 1% | Option 2 1% | Option 3 3% | Option 4, 10-year capped only 5% |
| Floating prepayment premium (Freddie Mac, 4/26) Year 4 | Option 1 1% | Option 2 1% | Option 3 2% | Option 4, 10-year capped only 4% |
| Floating prepayment premium (Freddie Mac, 4/26) Year 5 | Option 1 1% | Option 2 1% | Option 3 1% | Option 4, 10-year capped only 3% |
| Floating prepayment premium (Freddie Mac, 4/26) Year 6 | Option 1 1% | Option 2 1% | Option 3 1% | Option 4, 10-year capped only 2% |
| Floating prepayment premium (Freddie Mac, 4/26) Years 7 and 8 | Option 1 1% | Option 2 1% | Option 3 1% | Option 4, 10-year capped only 1% |
What maturity risk does a 5-year agency term create?
A 5-year agency term creates the most refinance risk because the balloon arrives soonest with the least principal paid off, so the rate your balance can carry at the next lender's coverage test sits closest to today's coupon; Fannie Mae's Multifamily Guide makes lenders analyze that exit before they close.
The Guide's refinance risk analysis requires the lender to prepare an exit strategy analyzing the borrower's ability to refinance in the year after maturity, for example using year-11 net cash flow on a 10-year term, by calculating a reversion cap rate and a Refinance Interest Rate: the maximum rate the remaining balance can support at the required DSCR. You can run the same test yourself (our arithmetic, illustrative):
Loan (assumption): $12,400,000 on a 30-year amortization, net cash flow held flat at $1,200,000 Illustrative coupons (Treasury on October 15 plus an assumed 1.60%): 6.51%, 6.60% and 6.70% Balance at maturity: about $11.61 million (5-year), $11.23 million (7-year), $10.56 million (10-year) Highest refinance rate that still clears 1.25x on a new 30-year amortization: about 7.35%, 7.69% and 8.34% Cushion over the original coupon: about 0.84, 1.09 and 1.64 points
That cushion is the real cost of a short term. This article reports the October 2026 curve and does not forecast it; the point is how much room each term leaves if rates or income move against you. Build the balloon into your model without assuming a refinance, as in modeling a rental loan balloon, and read the balloon payment definition if the term is new.
There is one way to buy cushion on a short term. Freddie Mac's sheets say no Refinance Test is necessary when the loan has an amortizing DCR of 1.40x or greater and an LTV of 60% or less, so sizing a 5-year loan to those levels trades proceeds for a lower balance at maturity.
Which agency term fits your hold plan?
Match the term to the date you expect to sell or refinance: a fixed-rate term should end just after that date so you exit inside the final 90 days without a premium, and if the date is uncertain, a floating loan's stepped premiums are known in advance, while a fixed loan's yield maintenance depends on rates at payoff.
| Term decision | 5-year term | 7-year term | 10-year term |
|---|---|---|---|
| Term decision Treasury on 2026-10-15 (U.S. Treasury) | 5-year term 4.91% | 7-year term 5.00% | 10-year term 5.10% |
| Term decision Maximum LTV, amortizing (Freddie Mac, 4/26) | 5-year term 75% | 7-year term 80% | 10-year term 80% |
| Term decision Maximum LTV, full-term interest-only (Freddie Mac, 4/26) | 5-year term 65% | 7-year term 65% | 10-year term 70% |
| Term decision Fixed-rate prepayment (Freddie Mac, 4/26) | 5-year term Yield maintenance, then lock-out and defeasance; none in final 90 days | 7-year term Same | 10-year term Same |
| Term decision Floating prepayment schedules (Freddie Mac, 4/26) | 5-year term Options 1 to 3 | 7-year term Options 1 to 3 | 10-year term Options 1 to 4 |
| Term decision Balance at maturity, $12.4 million example (our arithmetic) | 5-year term $11.61 million | 7-year term $11.23 million | 10-year term $10.56 million |
| Term decision Refinance-rate cushion at 1.25x (our arithmetic) | 5-year term 0.84 points | 7-year term 1.09 points | 10-year term 1.64 points |
| Term decision Fits a hold plan of (our view) | 5-year term A sale or refinance within five years | 7-year term Five to seven years | 10-year term Seven years or longer |
Three rules follow. Do not take a 5-year to save 0.19 points if you plan to hold for ten; you would trade about $23,560 a year for a refinance in five years with the thinnest cushion. Do not take a fixed 10-year if a sale in year four is likely, because yield maintenance or defeasance prices that exit. And if the plan is genuinely open, a floating 7-year or 10-year with a stepped schedule keeps the exit cost known, at the price of SOFR exposure and, if you buy one, the cost of a rate cap. For a loan you already hold that matures soon, the playbook is different: see refinancing a multifamily loan that matures in 2026.
How do you get the right agency term placed for your deal?
Option 1, our recommendation, is a commercial mortgage brokerage that prices all three terms, fixed and floating, against your hold plan before you lock, so the coupon, the LTV limit, the prepayment cost and the maturity cushion are compared on one page. YieldStack is an AI-native commercial mortgage brokerage that arranges financing for commercial real estate investors.
Option 1: a commercial mortgage brokerage (our pick). YieldStack's software matches the deal against a catalog of 20,000+ loan programs, a count of programs rather than of lenders. Human brokers then structure the request, negotiate for the borrower and carry the deal toward closing. On a term decision, that work is concrete: which term and prepayment schedule match the business plan, and when to lock the index. The agency loan page summarizes the product.
Option 2: an agency lender directly. Freddie Mac's term sheets direct borrowers to its Optigo lenders. A direct quote gives you one lender's spread on the term you asked about, so ask for all three terms and both rate types in writing.
Option 3: a shorter loan first. If you plan to sell or reposition within a year or two, the agency prepayment structures above may cost more than they save; compare a shorter-term loan before you commit.
What to send for a term comparison:
- Trailing 12-month operating statement and current rent roll
- Business plan with the expected sale or refinance date
- Target loan amount and the LTV you need
- Fixed or floating preference, and whether you can buy a rate cap
- The prepayment cost you can accept if you exit early
- Payoff statement on any existing loan
When the package is ready, send the deal for review. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
The bottom line
With the 5-year Treasury at 4.91% and the 10-year at 5.10% on October 15, 2026, a shorter agency term saves little coupon. The decision rests on the hold plan: Freddie Mac caps sub-7-year terms at 75% LTV, fixed loans carry yield maintenance or defeasance until the last 90 days, and a 5-year leaves the thinnest refinance cushion. Choose the term that ends after your exit, or float if the exit is open.