Life insurance company loan or bank loan

The trade in plain terms

The life company wants to own a safe loan for a long time and prices for it. The bank wants a profitable customer relationship and a loan it can renew or reprice on its own schedule. One gives you certainty, the other gives you options.

Worked deal: an $8 million loan, ten years each way

Illustration. A stabilized medical office building is worth $16,000,000, and the owner wants $8,000,000, half of value. The life company quotes an illustrative 5.65% fixed for 10 years on a 25-year schedule, non-recourse. The bank quotes 6.35% fixed for 5 years on a 25-year schedule with a guarantee; assume it renews in year five at 6.85% for another five years.

Ten years (illustration)	Life company	Bank
Annual payment, years 1 to 5	about $598,200	about $639,200
Annual payment, years 6 to 10	about $598,200	about $664,900 after the reset
Interest paid over 10 years	about $4,023,000	about $4,743,000
Balance at year 10	about $6,041,000	about $6,222,000
Rate risk in year 5	none	full; the 6.85% is an assumption
Personal guarantee	carve-outs only	full

Over ten years the life company loan costs about $720,000 less in interest in this example, pays down more principal and never resets. The bank loan’s year-five reset is where the risk lives: if the bank renews at a higher rate, or not at all, the owner absorbs it.

The bank wins this deal only if the owner needs flexibility. Sell in year three and the bank’s step-down might cost 3% of the balance, while the life company’s yield maintenance could cost much more if rates have fallen.

What each lender checks

Life company: location and quality first, then lease terms, tenant credit and rollover, and the sponsor’s record. It decides whether it would be comfortable owning the building if it ever had to. Medical office, industrial, grocery-anchored retail, apartments and credit-tenant properties in strong markets fit; transitional assets do not.

Bank: the guarantor’s personal financial statement and global cash flow, the deposit relationship, the appraisal and the property’s coverage, and its own concentration room. Banks lend on a wider range of property and sponsors, including smaller buildings in secondary markets.

The costs people miss

Life company

• The rate lock deposit, at risk if you walk.
• Transfer and added-debt restrictions for the whole term.
• Yield maintenance on early payoff, often with a lockout first.
• A correspondent’s placement fee.

Bank

• The guarantee’s effect on your next loan.
• Deposit requirements and covenants, including global coverage tests.
• Renewal risk at the reset, and a renewal fee.

Credit quality, read carefully

Both portfolios perform well, but the published rates are not comparable. MBA reports life company delinquency at 60 days or more and bank delinquency at 90 days or more plus nonaccrual, and warns that the definitions differ. On their own terms: life companies 0.48%² and banks 1.20%² in Q2 2026. FDIC data put bank investor commercial property loans at 1.42% of bank non-owner-occupied commercial property loans noncurrent³. ACLI reports 98.7%⁴ of insurers’ commercial mortgages in good standing.

Where each one wins

Situation	Lean toward	Why
Long hold, low leverage, strong market	Life company	Lowest fixed rate, long term, non-recourse
Single tenant with investment-grade credit	Life company or credit tenant lease financing	Insurers price long, safe leases tightly
Need for leverage or a lease-up	Bank	Insurers lend on stabilized property
Possible sale within five years	Bank	Lighter prepayment
Small building or secondary market	Bank or credit union	Most insurers target larger, prime assets
Forward closing months away	Life company	Forward rate locks

Own a stabilized, lightly leveraged property? Send the rent roll and leases, and we will put it in front of insurers and banks at the same time.