How to Refinance Your Commercial Property in Market Slow Down?


The commercial real estate industry investment can be quite complicated. There are a lot of things one needs to know, especially when it comes to refinancing.

Whether you are a new investor or you are considering refinancing, you can find all the details mentioned here in the guide.

After all, you would require the support of refinancing for various reasons, like making use of the equity you have built in the property or obtaining a lower interest rate. So, make sure you read it properly to get things right.

Does refinancing CRE make sense?

Although many people are interested in refinancing, they must have this question if it will be worth considering. To be honest, by commercial property refinancing, owners can make full use of the equity they have built in the property for a long time.

The money here will be used at important times. It will all depend on how much the property is worth and whether its value has increased or decreased since the time it was first purchased.

Reasons to consider refinance

Understanding when to consider refinancing can be a huge thing. When you are on the right track, you can save a lot of money and enjoy the benefits the most. Here are the reasons why considering refinancing will turn out to be in your favor.

Improves cash flow

A major reason why commercial property owners choose to refinance is to increase their cash flow. As the interest rates here will be low, they will be able to save up more cash every year by paying less on the debt. Besides this, the amortization can also be increased with an additional 30 years.

Consolidating debt

The borrowers generally have a portfolio that consists of various types of income-producing properties.

The property owners can easily balance the weakness of one with the strength of the other in the portfolio.

It can be done easily by consolidating and refinancing the mortgage into a single mortgage. With amortization, better pricing and fee reduction will be available to the owner.

Lock lower interest rate.

The borrowers now have an opportunity to lock in the interest rate with a refundable good fit deposit.

While submitting the application, you can make the most of the current low-interest rate environment to lock in a fixed-rate loan for ten years or even more, depending upon your requirements.

This can also be a viable situation rather than refinancing the property every few years during poor market conditions.

More favorable loan terms

Commercial Mortgage refinancing offers a great opportunity to negotiate favorable terms for the new loan.

In case you wish to reduce the monthly payments, you can simply extend the repayment period, while if you want to pay off your property sooner, you can also shorten the prepayment.

You now have an opportunity to refinance your mortgage from an adjustable to a fixed rate. Thus, the savings from it will be able to make refinancing worthwhile.

How to refinance a commercial property?

So, if you are now ready to refinance your commercial mortgage, then it is important that you know certain things.

First of all, it is necessary to demonstrate the ability to repay the loan and your creditworthiness.

Even if you were approved for a mortgage in the past, it does not show that you are eligible, especially if the financial condition of the company has changed.

There will be a requirement for a lot of documentation and personal guarantees to secure a commercial mortgage refinance loan for commercial real estate refinancing.

1. Get the financial records straight

The first and most important thing to do before you go with refinancing is to understand your financial condition. You need to describe the financial state of your company for at least two years.

For this, you will have to compile and submit the company’s tax returns, cash flow records, financial statements, and profit and loss statements.

Besides, you also have to provide financial data for about a year. The commercial real estate lenders will also require an in-depth business plan and summary that clearly showcases the company’s growth strategy.

You might have to introduce the leadership team of the company to buyers and highlight their track record and experience.

2. Know the true cost of credit

It is essential to know that the interest rate on business loans can be a lot higher than that on personal loans. This means the appraisal itself will set you back with about $2000 to $5000 or even more for the larger properties. In case there is not sufficient equity in the property, then you will not be able to get the loan.

Adding to it is the interest paid on the loan. You will also have to pay for things like loan origination fees, inspection, and closing costs. Besides, the resources used for managing and organizing the refinancing are also considered lost earnings.

3. See if put in the mortgage application

Generally, it is seen that the origination fee is 1% of the total amount of money you are borrowing.

So if you borrow about $1000000, the origination fees will come around $10,000. For calculating your break even, you must consider this expense as well.

Remember, there may be about 2 to 3 years of savings before the new mortgage will start paying itself. You need to assess the benefits and then make the decision.

If you find that the company has a property margin, then the bank will require a personal guarantee on the loan along with the company’s financial statement.

In this case, one or more of the primary owners will have to provide a personal guarantee on the loan using their property as a security.

4. Put in the mortgage application

Finally, once you are sure that the refinancing option will be right for your case, you need to go ahead with the process. For this, start by filling out the application.

Make sure you compare the rates and make the banks compete for your business. Also, do not worry about the origination points, as the refinancing mortgage will pay it off.

Just keep in mind the lenders will keep a check on any personal guarantors or companies’ credit histories as well, along with the additional information you offer them within the financial package.

They will check debt credit and income records to ensure there won’t be any complications later on in the future.

For good terms, a good credit history, full bill payment, and a good amount of liquid assets and income are essential for a personal loan.


If you are ready to refinance but are facing any difficulty, then you can consider getting professional support from Private Capital Investors.

They have a team of expert professionals who will be there to help you identify the best options available and then choose the one that fits your criteria.

No matter the amount you want, the experts will be there to help you get the best deals

Want to learn more? Get in touch with us today.

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