Commercial Mortgage Refinance

Just like homeowners businesses can take advantage of mortgage refinance to lower their interest rates and mortgage costs.

In a refinance a business takes out a new mortgage that takes the place of the existing mortgage. The existing mortgage is paid off by the new mortgage. The business owner then has to make the mortgage payments to the issuer of the new mortgage.

The main reason why businesses refinance their mortgages is obvious to lower their interest rates and mortgage costs. Many businesses refinance in order to get rid of older costlier mortgages such as floating interest rate mortgages.

When to Refinance a Commercial Mortgage 

A business should refinance its mortgage when it is in a position to get a better deal on the new mortgage. A good time to refinance a mortgage is when a business’s credit score improves. Businesses with higher credit scores can often get better deals on mortgages.

Another good time to refinance a mortgage is when a business’s cash flow increases substantially. Lenders might be willing to offer a better mortgage deal to a business that has increased its cash flow or reduced its operating costs.

A business that has substantially improved is operations say by hiring professional managers or buying new equipment might also be in a good position to get its mortgage refinanced. Businesses that have paid off a lot of their debts and reduced their use of credit might also have an easier time getting a mortgage refinanced.

The Refinancing Deal to Get

When a business refinances it needs to get the best terms and interest rates that it can get. If a business can’t get a really good deal on a refinance it should not refinance. The best deal is one that enables a business to lower its mortgage costs.

The best terms on a refinanced mortgage are usually a traditional 30 or 40 year mortgage. These mortgages usually give the business the lowest monthly payment so they can increase cash flow by freeing up additional money. Refinancing a floating interest rate or ARM can substantially reduce a business’s mortgage costs.

A business should also get a mortgage with a fixed interest rate. This means the interest rate stays the same every month because the mortgage provider can’t raise it.

Other Benefits of Refinancing

Refinancing a commercial mortgage provides many benefits to a business. One of the best benefits of refinancing is that it can reduce mortgage costs and free up more money to spend on operation or expansion. Another good benefit is that it can reduce the company’s debt load and put it in a better position to borrow money.

Refinancing can show investors that a business owner is responsible and willing to take control the firm’s finances. This can help a business owner write a new business plan and attract investment capital.

A final benefit of refinancing is that a business owner maybe able to take advantage of the equity in the property to open up new lines of credit. This could help the business owner finance expansion or new equipment.