• Megan Kingsbury

Recovery brings Refinance

Updated: Jul 14, 2021

As more and more businesses open and we begin to review and plan for a complete recovery – many are looking to refinance their commercial loans with rates low and banks willing to finally talk about it again.

Whenever interest rates drop, the appeal of refinancing grows. But it's important to know the real costs -- and potential savings -- before making a move. Just as it's possible to save money with a refinance, it's also possible that your refinance will cost you money.

It's all about the intersection of interest rates, costs and your expected time frame. Believe it or not, it can even be possible to save money for a time with a refinance even if your new interest rate is higher than your existing one! Every business should ask itself – should we refinance our current loan?

Refinancing commercial real estate is much different than the process of refinancing residential properties purchased for personal use and enjoyment. Commercial real estate is intended to generate income which underlies the value of the property. More Income = more favorable loan terms.

Some things to consider:

  • What type of loan terms do you currently have? Is there a balloon payment and when? Refinance can help delay that payment by replacing the original loan with a new loan.

  • What are you current Basis Points? A basis point is equal to 0.01%. So, if a rate goes up or down 25 basis points, it means that it has increased or decreased by .25%. Before you refinance commercial property, it’s a good idea to shop around with several lenders in order to understand the various loan programs and terms available for your situation.

  • There are many reasons why you may want to refinance your commercial real estate:

  • Extra Cash on Hand – Cash-out refinance provides a great alternative for an owner who might consider selling a property.

  • Invest in Improvements – increase the current value of your property by making improvements.

  • Expand your Portfolio – Leverage to purchase additional property.

  • Lower Interest Rates – traditionally we only consider this of value if you can lower by 2% or more.

  • More Favorable Loan Terms – lengthen time for balloon payment for example.

  • Multiple Types of Commercial Refinance Loans and getting assistance from a Commercial Loan Broker can help determine your best options and lenders.

What ever you decide to do – now is the time to consider doing something!

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