What Is a Basis Point?
A basis point is one one-hundredth of one percent: 1 bp = 0.01%, and 100 bps = 1%. Commercial real estate prices loans, spreads, and cap rates in basis points because small differences move large dollars. Read the full definition in the Basis Point glossary entry.
Why Basis Points Matter on Your Deal
Rate quotes are usually a spread over a benchmark, such as SOFR plus 275 bps, and lenders compete at the 5-to-25 bps level. On the debt side, every basis point changes debt service and your DSCR. On the value side, cap rate moves of 25 to 100 bps can swing value by hundreds of thousands of dollars on the same income. Use the Loan Sizer to see how rate changes affect how much you can borrow.
Frequently Asked Questions
How do I convert basis points to a percent?
Divide basis points by 100. 25 bps = 0.25%, 50 bps = 0.50%, 100 bps = 1.00%. To convert a percent to basis points, multiply by 100.
How much does 25 basis points cost on a commercial loan?
On a $10 million loan at 6.50% with 30-year amortization, a 25 basis point increase raises annual debt service by about $20,000, or roughly $200,000 over a 10-year hold. Interest-only loans cost exactly $25,000 a year per 25 bps on $10 million.
How does a cap rate change in basis points affect value?
Value equals NOI divided by the cap rate. With $650,000 of NOI, a 6.50% cap rate implies $10 million of value. A 50 basis point expansion to 7.00% drops value to about $9.29 million, a loss of roughly $714,000, without any change in income.