When you refinance commercial property, just like a home refinance, you’ll use a new loan to pay off your existing commercial mortgage. However, instead of the loan maturing in 30 years like a home, it may mature in five, ten or 25 years, which means you refinance into a new loan all together. The other major difference is that commercial loans depend on net operating income of the property. This means the higher the operating income the better loan terms you can get.
Pros and Cons to Refinance Commercial Property
You may be able to lower your monthly payment. Most reasons to refinance are to lower the monthly payment. This can be done by getting a lower mortgage rate than what you currently have.
You may be able to get better loan terms. It may be beneficial, if you own commercial real estate to shorten or lengthen the loan repayment or even changing the type of loan. For example, if you were to refinance to a fixed-rate loan from an adjustable-rate loan, you may be able to get more stability if rates were to go up.
You could avoid a hefty Balloon payment. A Balloon payment is a lump-sum payment for the rest of the loan amount. This is an option for commercial loans since they usually have shorter repayment periods than a traditional house mortgage.
You’ll pay upfront costs. Like getting a loan for the first time, when refinancing commercial property, you will have to pay closing cost. To avoid being hurt by these costs, make sure that savings from the new loan outweigh any fees and cost that you’ll pay up front.
You could be faced with a prepayment fee for your former lender. Lenders can charge a prepayment fee when changing the loans. Make sure to account for this in your upfront cost.
How To Start
If you are considering a strategic move to refinance your business, there can be a lot of steps and questions. Here at TNT Funding and Associates, we are here to help. Our team has successfully matched both existing and start-up businesses with the lenders and programs that provide the financial tools needed to excel in today’s market. Please contact us for a NO OBLIGATION advisory conversation. We strive to make the process easy, answering any questions along the way. We make sure that you end up successful in the refinance of your business. To get started contact us today.