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Commercial Refinance Loans

Blog | Commercial Refinance Loans

Commercial Refinance Loans

  • Posted by Blake Mortage
  • /
  • March 4, 2020
commercial refinance loans

Can Commercial Refinance Loans help you?

Have you ever met someone in the commercial real estate industry who somehow was successful in growing their portfolio in such a short period of time?

You may have wondered how they coped up with the expensiveness of commercial real estate and how they managed to come up with up-front capital for purchasing the property. On top of that, how do they manage to stay on top of their monthly mortgage payments?

Well, commercial mortgage refinancing may be the answer!

What are Commercial Refinance Loans?

Unlike residential mortgages, commercial loans are either short-term loans of three years or less or long-term varying between 5-20 years.  

The former is usually used for building a property or making significant improvements to it. Long-term loans generally reduce over a period of 30 years, just like residential loans.

Commercial refinance loans mature fast and you’re required to make a balloon payment at the end. Basically, what happens is that you continue to pay incrementally over the 30-year period but at the end of the loan duration, you’ll be done with only a fraction of the principal amount and the rest of the amount will become due. This means that the last round of payment is typically very high.

Refinancing is the Way to Go

When a balloon payment is about to become due, you have the option of refinancing the property. Doing so will help you pay off the old loan, covering you from the upcoming balloon payment. This will also restart the clock on a new loan albeit with new terms and conditions.

Benefits of Refinancing

Here are a few benefits that property owners get to enjoy from refinancing their commercial property.

Extra Cash on Hand

Refinancing commercial property offers property owners some extra cash on their hands – and the best thing is that the cash is tax-free and can be used for any purpose.

Investing in Property Improvements

After you’ve just purchased a commercial property, you probably won’t have the money to make property improvements.

However, after you collect rents and pay down your original mortgage, you may refinance the property to generate cash and then, invest in property improvements.

Now obviously, with all those improvements, you’ll be able to charge more when you rent it out to new tenants. This is a smart trick to improve our cash flow and overall net operating income (NOI).

Favorable Loan Terms

Refinancing your commercial property is a great way to obtain more favorable loan terms. Some investors take this path when they want to dodge their upcoming balloon payment.

Expand Your Investment Portfolio

Many commercial property owners refinance their property when they want to expand their investment portfolio.

Our experts will be happy to assist you in finding the best commercial refinance loan options. If you’re looking to refinance your 1-3 million commercial property that’s spread over 10,000-20,000 square feet and whose balloon payment is due in the next few days with a mortgage that is 51% owner-occupied and 49% tenant-occupied, get in touch with us today!

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