With many commercial real estate owners, this is a question that can now be asked. A few years ago, lenders were not too interested in "re-financing", as they could offer better loans through a new loan....so a new loan was made. And, at the time, these loans were at the going market rate...probably in the 6 or 7% interest range. A good deal for all.
Well, now we are making commercial real estate loans at a much lower rate, and re-financing those more expensive loans makes a lot of sense. And, people are asking me..."just what is re-financing?"
Re-financing means paying off an existing loan with the proceeds from a new loan, usually of the same size, and using the same property as collateral. In order to decide whether this is worthwhile, the savings in interest must be weighed against the fees associated with refinancing. The difficult part of this calculation is predicting how much the up-front money would be worth when the savings are received. Other reasons to refinance include reducing the term of a longer mortgage, or switching between a fixed-rate and an adjustable-rate mortgage. If there are prepayment fees attached to the existing mortgage, refinancing becomes less favorable because of the increased cost to the borrower at the time of the refinancingakes a lot more sense.
So, re-financing is good for some, and not so good for others. Check with your CPA....and if there is interest, contact me....and we look at all commercial properties. Get some additional detail at www.largentfinancial.com
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