Commercial Mortgage Refinancing
“There May Be Several Commercial Mortgage Refinancing Scenarios To Consider For Your Property”
Sometimes lost in all the discussion surrounding the refinancing of a residential mortgage is the opportunities that may exist for commercial mortgage refinancing.
Similar to residential property refinancing, there are three basic reasons to consider getting a new mortgage written. First, you want to see if you can reduce your overall cost of borrowing by locking in lower rates. Second, you have a need in your business for incremental capital and want to use commercial loan refinancing as a way to leverage your equity. And the third scenario is a combination of the first two where you’re seeking both incremental capital and lower overall rates.
While the motivations may be the same, the process of achieving these results is typically going to be more complicated and costly. Remember that commercial appraisals can cost significantly more than residential appraisals. Add on the need for things like updated environmental reports and updated surveys and the administrative costs for refinancing will be higher.
Another thing to consider is the difference in rate movements that can exist between the residential and commercial markets. First of all, commercial rates are higher based on the higher level of perceived risk for financing a commercial property versus a residential property. This can result in higher prepayment penalties on the same mortgage value.
Even though 2009 and 2010 has seen record lows in interest rate levels, commercial rates have not reflected this as much as residential rates, providing a less of an opportunity for rate savings in many cases.
Regardless of the higher level of complexity or the added costs that you may incur, like any refinancing exercise, commercial mortgage refinancing is about crunching the numbers to see if a refinancing strategy provides a net benefit to the borrower.
This process is likely going to be more complicated to complete which is why you should utilize the services of a commercial mortgage broker to work through the numbers for any scenario you may be considering. Its not hard to incur unnecessary costs in this process, especially if its something you’ve never attempted before.
As a first step, I recommend that you give me a call so that I can quickly assess your situation and then go over the available options with you to determine the best course of action or non action.
With commercial mortgage refinancing, many times the numbers don’t work out which is why its so important to go through the assessment exercise and avoid any unnecessary costs.
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About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel