In today’s ever-changing real estate market, is becoming increasingly popular. It is an important option to explore when looking to ensure the long-term success of a commercial property.
involves replacing an existing loan with a new one that has different terms. It is most often used to help property owners reduce their monthly payments, access additional liquidity, or pay off the loan earlier than originally agreed upon.
Refinancing commercial property can be a complex process, often requiring the help of a mortgage broker or advisor to help guide the property owner through the steps. This article will cover the basics of commercial real estate refinance, including when it is beneficial, the key considerations, and how to go about refinancing.
Benefits of Refinancing
The benefits to refinancing a commercial property can vary depending on the owner’s specific needs and objectives. Here are some of the most common reasons that owners choose to refinance:
- Reduce monthly payments – Refinancing can help reduce the monthly payments associated with a loan by either reducing the interest rate, or extending the loan term.
- Access additional liquidity – Taking out a new loan can provide owners with access to additional cash that can be used to make renovations or additional investments.
- Pay off the loan sooner – Refinancing can help owners pay off their loans faster by extending the term of the loan or by taking out a larger loan with a shorter repayment period.
Before committing to a refinance, owners should consider the following:
- Credit score – A good credit score is essential for getting the best terms and lowest interest rate on a loan.
- Debt-to-income ratio – Your DTI ratio should be considered to ensure you are able to afford the monthly payments.
- Property value – The value of the property should be assessed to ensure that it is worth more than the amount of debt secured against it.
- Interest rates – It is important to do your research and compare different lenders to ensure you get the best deal.
How to Refinance
When refinancing a commercial property, it is recommended that owners work with a mortgage broker or advisor to ensure they get the best deal. The basic steps involved in refinancing are as follows:
- Determine your financial needs – Before committing to a refinance, assess your financial needs and objectives.
- Gather documents – Gather any documentation related to the current loan and the property.
- Shop around – Compare lenders to ensure you get the best deal.
- Submit an application – Submit a loan application to the lender. This will involve extensive paperwork and information about your financial position.
- Closing – Once approved, you will then be required to complete the closing process which involves signing documents and paying related fees.
Are there fees associated with refinancing?
Yes, there are typically fees associated with refinancing. These can include origination fees, attorney fees, and closing costs.
How long does it take to refinance a commercial property?
The amount of time required to refinance a commercial property will vary depending on the complexity of the transaction, but it typically takes several weeks.
is often the best option for owners looking to reduce their monthly payments, access additional liquidity, or pay off the loan sooner. The process can be complex and requires an experienced advisor to ensure the best deal is secured. It is important to take the time to shop around, compare lenders, and understand the fees associated with refinancing before committing to a loan.
Remember, if you need help exploring , reach out to a qualified mortgage broker or advisor.