Navigating Multifamily Debt in 2026

Borrowers in these markets are no longer waiting for rates to drop. Instead, they are restructuring capital stacks, buying down rates, and timing decisions more carefully. Kristen Croxton, Principal and Co-Founder of Arcus Harbor Real Estate Capital, has observed this adjustment from the front lines and shares what borrowers need to know as they head into the rest of 2026.

How Borrowers Are Sourcing Debt Now

Borrowers navigating today’s complex lending environment need access to debt options across multiple channels, not just a single institution’s products. Independent advisors can source debt across agency, CMBS, life company, bank, and debt fund channels, giving borrowers a broader range of solutions than any single lender can offer.

That flexibility matters in a market where deal size, property type, and geography each narrow the field of viable lenders. Borrowers who understand which lender fits which deal type are better positioned to secure financing on competitive terms. “We felt that if we started our own company, we could really focus on the clients and scour the market for best execution,” Croxton says.

Borrowers Accept Higher Rate Reality

For much of 2022 and 2023, borrowers hoped the rate environment would normalize quickly. That posture is largely gone. “I think everyone has accepted that there’s not going to be some precipitous drop in rates,” Croxton notes.

Rate buydowns — where borrowers pay upfront to reduce their interest rate — have become a regular part of deal structuring over the past 12 to 24 months. In refinance situations where sponsors need new proceeds to cover existing debt, buying down the rate has helped close the gap between what a deal can support and what the market offers. Treasury volatility compounds the challenge. Borrowers who are positioned and ready to lock well in advance of any hard deadline are better placed to take advantage of favorable movements. “You could have a 20 basis point differential within a couple of days in your favor if you’re ready to lock,” Croxton says.

Where Debt Is Available Now

For stabilized assets, agency debt remains the most competitive option. “If you’re looking at a very basic, straightforward refinance, the agencies will win any day,” Croxton says. Life companies are strong for Class A assets and larger loan sizes. Debt funds fill the gap for deals that are not yet stabilized, or where years of rate cap spending crowded out planned renovations and the capital stack needs rebuilding. Property age is increasingly a filter across lender types. Where lenders once drew the line at properties built before the 1960s, some now hesitate at assets older than 2000.

Financing has become notably harder in bridge-to-bridge situations — where a borrower needs to replace one short-term loan with another. Lenders are cautious about extending again without meaningful equity support, either through a cash infusion from the existing sponsor or a new equity partner. “A lot of people back out of the market from a lender standpoint” in those scenarios, Croxton observes. Sponsors who cannot show that support early in the process face a narrower set of lender options.

Operations Now Drive Credit Decisions

Lenders are scrutinizing borrowers more carefully than in prior cycles. The fraud issues that surfaced at Fannie Mae and Freddie Mac have left a lasting mark on underwriting behavior. Sponsors can expect detailed reviews of their full real estate schedule, including which assets are performing, which carry maturity risk, and the overall financial picture.

Trailing 12-month financials form the basis for most underwriting, and expenses that have drifted out of line will show up in the numbers. Insurance is a frequently overlooked lever. Property coverage costs have started to come down in some cases, but that relief is not automatic. “You need to push your insurance brokers to clear the market,” Croxton says.

Planning Ahead in an Uncertain Market

Waiting until three months before loan maturity to begin the financing process is the most common and most avoidable mistake sponsors make. Starting earlier allows borrowers to monitor occupancy trajectories, identify the right rate-lock window, and work through capital-stack complexity without deadline pressure. The same applies to acquisitions. Buyers who engage financing advisors before submitting an offer are better positioned to assess deal viability before committing. “Even if you’re not sure you’re going to put an offer in, we’re happy to run the numbers so you can get a good feel for what you’re looking at,” Croxton says.

Regulatory uncertainty adds another layer of complexity heading into the rest of 2026. Rent control measures in certain states and cities are already affecting underwriting assumptions and investor appetite. The build-to-rent sector faces additional pressure from pending legislation that remains poorly defined, causing some lenders to pause. “Hopefully, legislation gets cleared up and through in short order so everybody can understand where they are and that market can move again,” Croxton says. On the supply side, slower new deliveries are expected to support absorption in markets with elevated vacancy, gradually improving operating conditions for existing owners.