Why Should I Refinance My Commercial Property?

Refinancing a commercial loan may seem like a headache that’s not worth the trouble, but there are many advantages to a commercial refinance that you may not be aware of. One of the chief reasons to refinance is that you can negotiate better terms and a better interest rate, and this could save you a great deal of money in the long run. However, there are also other benefits to refinancing, and today you'll find out what they are.

Save Money by Taking Advantage of Lower Interest Rates

Interest rates right now are lower than they've been in years. So, there's a good chance you could refinance your loan and secure a much lower interest rate, which could save you thousands of dollars in interest payments over the next 5 to 10 years (the typical term for a commercial mortgage), and help you pay off your principal faster.

Refinance Your Commercial Property to Free Up Capital and Increase Cash Flow

When you renegotiate your mortgage, you'll be able to negotiate for better terms and a better interest rate, and this could significantly decrease your monthly mortgage payments. That extra cash flow can give you the capital you need for other investments, renovations, repairs, maintenance, debt consolidation, and other projects, or it can put you in a better position to secure additional loans if necessary. And if you need even more money, consider a cash-out refinance, which will allow you to borrow back some of the equity you've built up in the property. 

Negotiate Better Terms

When you negotiate mortgage terms with your lender, one of the most important factors the lender will consider is your net operating income (NOI), which is a measure of the revenue generated by the property less the expenses. The better your NOI, the better terms you'll be eligible for. A higher NOI will also mean you can access more of the equity in the property, which is vital if you're refinancing to increase cash flow.

Skip a Large Balloon Payment

When many commercial mortgages mature, there's a balloon payment that comes due at the end of the term. At this time, you're expected to repay the remaining principal, and not a lot of investors have that kind of money available. Instead of paying the balloon payment, you can refinance the mortgage for another term, thereby deferring the balloon payment for another 5 to 10 years.

Switch to a More Stable Loan Type

If you currently have an adjustable rate mortgage and are looking for something with more stability and predictability, a refinance is the perfect opportunity to achieve this. When you refinance, opt instead for a fixed-rate mortgage that will have the same interest rate and the same monthly payments throughout the year.

Refinancing your commercial mortgage doesn't have to be a hassle, and you stand to gain a great deal by refinancing your loan now. If you want to save money, negotiate a better interest rate, free up capital, and enjoy the other benefits of a refinance, then you should get your application started today.