Considering refinancing your commercial property? There are plenty of reasons to think it over. You might be looking for a cash-out refinance to free up some funds for repairs or renovations. You might want to switch from a variable to a fixed rate in order to lock in some financial security. Maybe you have an upcoming balloon payment (when most of your loan comes due at the end) that you’d like to avoid. Or maybe you’d just like lower rates.
Whatever the reasoning, Largo can help. With offices in Buffalo, Albany, Manhattan, Toronto and Florida, we’ve provided commercial real estate financing solutions to businesses like yours all over the country. Read on for some tips!
1 – Lock in on Historically Low Long-Term Interest Rates
Largo’s correspondent lenders are able to provide long term (10+ years) loans at fixed interest rates. In most instances you have the ability to lock rate at application with a refundable good faith deposit. Instead of financing your property every few years in unknown market conditions, you can take advantage of today’s low interest rate environment and guarantee yourself a low fixed rate loan for 10 years or more.
2 – Improve Cash Flow
A primary reason an owner refinances their commercial property is to improve cash flow. By taking advantage of the current interest rate environment, borrowers are able reduce their annual debt service resulting in additional cash flow. In addition, there is the ability to reloading the amortization up to 30 years.
3 – Borrowing Prepayment Fees
Most borrowers are hesitant to refinance their property prior to maturity because of the prepayment premium associated with a commercial loan payoff. In this low rate environment, if your loan is maturing in the next 2-3 years, it may be to your advantage to consider paying your existing loan off early. By refinancing at a more favorable interest rate you may be able to absorb the cost of the penalty in a short period of time and lower your P&I payment in the process.
4 – Consolidating Debt
In most instances, borrowers own multiple commercial properties. By refinancing and consolidating various mortgages into one loan, property owners are able to off-set certain risks of certain properties with the strengths of the other properties in a portfolio. In doing so an owner may be able to take advantage of more favorable terms including pricing, amortization, as well as a reduction in fees.
5 – Equity Disbursement
In addition to paying off the existing debt, commercial properties can be refinanced as a means to recoup equity. This cash-out can be of considerable size and free up working capital for other projects.
6 – Getting out of an Adjustable Rate Loan
Adjustable interest rate loans fluctuate due to a variety of conditions. By refinancing to a fixed rate, property owners can greatly reduce volatility in a portfolio. Locking into today’s low interest rates will guarantee avoidance of unpredictable interest rate fluctuations in the future.
By Kevin Ross, V.P. of Originations, Largo Capital Limited
The Largo Group of Companies is a commercial mortgage banking firm that structures, closes and services commercial mortgages for acquisitions, refinances and redevelopment projects. Largo arranges innovative commercial real estate financing structures for borrowers throughout the United States and Canada. We manage the loan process from loan application through closing and service the loan throughout its term.
Largo has 17 correspondent relationships and offers additional lending sources, providing property owners and developers long-term, non-recourse commercial real estate financing at a competitive fixed rate.