Wednesday, January 23, 2008

Refinancing Commercial Real Estate

Refinancing Commercial Real Estate by Anthony Seruga and Yolly Bishop

As a commercial real estate investor, you need every advantage you can get. The market can be challenging so when you have an opportunity to help yourself, you've got to take it. One such advantage for you could be refinancing your commercial real estate. Why would you want to refinance your properties? There are several reasons that could be beneficial to you. Let's look at a few of the reasons in detail.

Unlock Your Equity

One of the best reasons to refinance your commercial real estate is to get a hold of the equity. When it is tied up in one property, it's basically doing you no good. When the equity just sits there, the bank is the only one who gets to use it. If you refinance your commercial real estate, there are a number of options that you can enjoy.

Probably the smartest option is to put the money back into other commercial real estate. You've probably had your eye on some other properties anyways. Now you can use the money you unlocked from refinancing to buy them.

Improve Your Interest Rate

Another reason to consider refinancing your commercial real estate is to avoid paying a lot of interest on your current loan. When you locked in your interest rate, it may have been an undesirable one. Now, the banks might be offering more attractive terms. If you can get a significantly lower interest rate by refinancing, it could be worth it. Before you jump right in and refinancing based on the interest rate alone, do your homework. Sometimes lenders charge enough points and fees that it cancels out the savings on the interest. In some cases it can be more of a hassle than it's worth.

Prior to making any decisions on refinancing your commercial real estate, it is a good idea to sit down with an advisor. Find someone who knows what they're talking about when it comes to loans. You could get a fixed rate, adjustable rate, balloon mortgage, or any other number of loans. This is why it is important to weigh all of your options.

If you're looking at refinancing into an adjustable rate mortgage, be sure to get all the details. Find out the cap on the interest rate and get an idea of how much it fluctuates. The interest rate will be tied to some sort of index. Make sure you know which one and try to pick one that is less volatile.

Overall, refinancing your commercial real estate can be a great idea under the right circumstances. However, don't be sold by high-pressure tactics or gimmicks. Make sure it's the right deal for you before agreeing to extended terms. This way, when its time to refinance, you'll know that you got the best deal available. You'll feel a lot better about it when its time to pay the mortgage on your commercial real estate properties

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