Top 4 Reasons to Refinance Your Commercial Mortgage

Business owners can refinance
their commercial mortgage
loans in many different ways
to improve their financial
outlook. Here’s a look at some
of the most popular reasons to
refinance a commercial
mortgage:
1. Cash-Out Refinance
If a business owner has
accrued a significant amount of
equity in the commercial
property, it may be possible to
pull out a portion of it as cash
to be used for other purposes.
This can be an effective way to
finance property repairs or
improvements or even provide
working capital for day-to-day
business needs. These cash-out
refinance loans can be paid out
as a lump sum or as a line of
credit to be used as needed.
2. Switch to Fixed Rate
Sometimes business owners get
commercial loans with
adjustable rates in order to
keep initial costs down or to
capitalize on the market’s low
interest rates. Yet if interest
rates starts to rise or when the
beginning period of low rates
ends, adjustable rate
commercial mortgages can
become quite expensive. Plus
the constantly adjusting rates
can make it difficult for
businesses to predict their
monthly payments. A refinance
loan can remake an ARM loan
into fixed-rate commercial
mortgage with much more
predictability.
3. Avoid a Balloon Payment
Some commercial loans come
with an attached “balloon
payment” – when the majority
of the loan balance comes due
at the end of the loan. For
many businesses, making that
last payment can be almost
impossible, so refinancing into
a more conventional
commercial mortgage can save
businesses from that looming
balloon payment.
4. Take Advantage of Lower Rates
Reducing total loan costs is
another reason business
owners look at refinancing
their commercial loans. When
market interest rates drop
dramatically, as they have in
the past several years,
companies can save thousands
of dollars in interest and lower
their payments by refinancing
into a loan with a lower
interest rate.
Of course all refinance loans
require fees like closing costs,
appraisals and lenders fees. It
is important for business
owners to weigh the costs of
refinancing with the benefits,
but if they plan to hold on to
the commercial property for
many years, the merits of a
refinance often make sense.