Maybe you’ve decided to refinance your commercial real estate loan in order to get a lower interest rate, or maybe your financial situation has changed and you aren’t able to make the payments that you could before. You certainly aren’t alone at the moment — an estimated $1.4 trillion worth of commercial mortgages are maturing between 2014 and 2017, and 11,000 maturing CMBS alone are likely to total $346 billion. Many commercial real estate investors have already realized that the financial environment across the country is changing.
Regardless of why you’ve decided to refinance your commercial real estate loan, it’s important to know that the process doesn’t have to be as difficult as it seems. Here’s what you need to know about refinancing commercial real estate loans:
- First, it’s important to figure out if you really should refinance your loan. Most people refinance because they’ve found lower commercial mortgage rates or because they have a balloon payment due within the coming year.
- It’s also important to understand that you’ll be dealing with certain expenses from refinancing. In some cases, it’s better to stick with your current lender when you refinance; in other cases, you may want to go with a new lender. You might also be dealing with a prepayment penalty and closing costs.
- The new commercial real estate loan you’ll receive might not be the same type of loan that your current loan is — and that’s okay, because it’s completely normal and acceptable for your business’s priorities to change. Maybe you need extra cash for repairs, or maybe you want to be able to plan your monthly expenses better with a fixed-rate loan. Look at your options carefully and think about what’s most likely to help your business in the future — and keep in mind that this might not be the option that’s worked for you in the past, nor the option that’s worked for other businesses.
Many people avoid refinancing their commercial real estate loans because they think the process is going to be more work than it’s worth, but when you know exactly what to expect, you can prepare yourself adequately and find the loan that meets your needs perfectly.