Five year fixed or three year with a soft prepay, if you believe 2027 is better than 2026

I've been reading the supply side for a while, mostly because I wanted to know when land in these submarkets stops competing with new apartment deliveries. The read most people seem to share is that the delivery wave is thinning and absorption catches up sometime around 2027, which would mean tighter vacancy and firmer rents then than now.

So the term question on a 9-unit I'm circling. A five year fixed gets me through the whole window without a maturity, and I stop caring what rates do in between. The prepayment penalty on those tends to be heavier and steps down slowly, so if the building performs and I want to refinance into the better NOI in 2028, that exit costs money.

A three year with a lighter prepay lets me refinance right when the income should look best, and it's usually cheaper to get out of. It also hands me a maturity date I don't control the market for. Plenty of people in this room have watched a short term loan mature into a market that didn't cooperate.

I can't decide whether I'm buying certainty or optionality, and I don't think the answer is the same for everyone. Actual terms and penalty structures vary by lender, so I'd confirm in writing before assuming any of this. How do you think about it?