Mortgage Refinance Commercial Tips
January 28th, 2009. Published under Loans. No Comments.
Mortgage Refinance on a commercial property can be tricky, but it is possible to prepare yourself by becoming very familiar with how the process works, what to beware of and some of the terminology, this will help you understand what to expect at the same time increasing your knowledge.
Without some familiarity pertaining to a Mortgage Refinance it could be difficult to understand where to start. Without some experience in financing, whether it’s on an initial loan or a Residential Loan, these terms may seem like foreign language or somewhat silly for such a serious matter. A few examples would be: Arm, Balloon, Bridge Loans, Mezzanine Loans, Conduit or CMBS Loans etc.
The initial thought process you had used before will be slightly different from the one used to prepare for a Mortgage Refinance. You had to think about the time it will take to secure a loan this size. It is possible for the amount of time specified on the contract to purchase could expire before you get funded, protection from default on such a large loan, not to mention collateral, down payment, closing costs and so on, not too unlike a mortgage on a house. Although, some of these items are the same, it can become very complicated on a loan this size for a commercial property as you get further along.
Now that you have experience, when learning the thought process behind Mortgage Refinance in the next paragraph, you will see the difference in thought from your original loan. The most prominent reasons people look at Mortgage Refinance are because of taxes, facing a ballooning loan or to help reduce monthly payments and interest. And it may also reduce the life of the loan.
You had to make sure you can handle such an obligation by speaking to your Financial Advisor and your Accountant about how long your finances could carry the loan if things don’t go as planned before ever thinking of moving onto Mortgage Refinance.
Do a simple break even analysis to compare costs of other lenders versus your existing bank. If they know you are looking for a Mortgage Refinance, your current bank may offer to reset the loan.
The terminology is somewhat different when it comes to Loan Refinance. You start looking at possible Prepayment Penalties, Cash out option Proceeds, and maybe you want to inject the money you cash out into new property or update your current property, what is the Discounted Cash Flow, Current vs. Proposed Loan to Value Ratio.
Successful Brokerage firms will want to share information with you. Remember, knowledge is power, stay informed by reading and researching your topic. When looking for a Broker don’t hesitate to ask how long they have been in business and their approval vs. denial ratio.