Tips for Refinancing Your Commercial Loan with Confidence

Refinancing a commercial loan can be a great opportunity for real estate investors to secure a better rate and more favorable terms, avoid balloon payments, and even access equity that they have built up in their property. But there are some common mistakes people make when refinancing loans. Here are a few common refinancing pitfalls, as well as tips to avoid them as you set out to refinance your commercial property.

Refinance when the time is right for you

Interest rates have been low for the past few years, and this has many borrowers scrambling to secure an investment property refinance. However, refinancing does not make sense for every borrower type. Instead of following general trends, be sure to make your decisions based on your specific financial situation and long-term goals.

That being said, it is a good idea to gain a basic understanding of the mortgage market. If you’re thinking about taking cash out of your current mortgage to pay for property improvements, it can be helpful to know about the current rate environment and the ways in which your decision could impact your investment in the coming years.

Explore Different Options

Your current lender could be your best option when refinancing your commercial mortgage, but the only way to know for sure is to learn what other financial institutions have to offer. Benefits could include lower rates, better terms, fewer fees and penalties, or just a more positive relationship overall between you and the lender.

Choose Your Loan Terms Carefully

Many people take advantage of refinancing a commercial loan to lock into a mortgage with better terms, but it’s important to think through all the consequences of this before proceeding. For instance, maybe you want a shorter term so you can pay off your mortgage faster, but this could result in higher payments that perhaps you can't afford. On the other hand, choosing a longer term with lower payments will end up create more interest payments over the course of the mortgage.

Again, the best decision for you will always depend on your specific needs and long-term investment goals.

Don’t Forget to Factor in Closing Costs and Other Fees

One of the most common pitfalls people encounter when refinancing a commercial mortgage is forgetting about the additional costs. Many people get so wrapped up in the possibility of a lower interest rate that they don’t budget for these fees, which can include:

  • Closing costs

  • Prepayment penalties

  • Application and administration fees

  • Valuation or appraisal costs

  • Lawyer's fees

Refinancing your commercial mortgage can be a great opportunity, and if you are able to execute your strategy successfully, you could end up with better terms, a lower rate, and possibly even more cash in your pocket for new projects and investments.

If you’re interested in refinancing your commercial property, reach out to our experienced mortgage team today.