Refinancing A Commercial Real Estate Loan

Declining interest rates and the opportunity to improve loan terms are two key advantages to refinancing a commercial real estate loan. If you are looking to refinance your commercial real estate loan and find yourself fearful of the application form, these tips will help you prepare for your best chance to get refinanced: 

Consider your current terms and why you want to refinance 
Before even going down the road of refinance, it is important to carefully calculate the costs involved against the potential monthly savings. Are you looking to refinance debt, or do you need money for building improvements? If you have the opportunity to lower your rate by around 1 percent or more, and plan to keep your property for more than four years, refinancing could be a good option. Consider why you want to refinance, as the refinancing process details an assortment of costs. Keeping your long-term goals in mind will help guide your decision.

Get your paperwork ready 
Know what your lenders will be looking for and do your homework. Commercial properties are considered much riskier than houses so you will be evaluated differently and often with more scrutiny than if you were refinancing your house. Have your financial papers ready, like tax returns, balance sheets, profit and loss statements, cash flow, etc.  It will be important to make sure the following are also in good standing:

• Credit Score
• Debt-to-income ratio
• Income 

Prepare all of the documents the lender will need to assess your business. Mortgage lenders may require a well-thought-out business plan, as well.

Know your value
Be aware of where the value of your property stands. Even more in this current climate is it important to keep this in mind, as a property's value could have changed since the original funding. This has the potential to change your loan-to-value calculation, or LTV. It could even result in you having to come up with additional equity in order to qualify for a refinanced loan.

Assemble your team 
Getting the right members on board will ensure that the process goes much more smoothly. You will want to have the buy-in and assistance of the:

• Title Company
• Real Estate Attorney
• Mortgage Banker

Having the right players on your side and cued in to the refinancing will move the project along at a much faster pace.

Contributing Author:

Aaron Mesmer
Acquisitions & Investment Sales
Block Real Estate Services
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