Commercial real estate refinances an existing commercial real estate loan with a new one. This is typically done to take advantage of lower interest rates, lower monthly payments, or to access cash for business operations or other investments.

Why refinance?

One of the main reasons to refinance a commercial real estate loan is to take advantage of lower interest rates. When interest rates drop, the cost of borrowing money decreases and refinancing can result in lower monthly payments and overall interest costs. Refinancing can also provide access to cash that can be used for various business purposes, such as remodeling or expanding the property.

Types of refinancing:

There are two main commercial real estates refinance types: rate and term refinance and cash-out refinance.

1: Rate and term refinance are when a borrower refinances their current loan with a new loan with a lower interest rate or longer loan term. This refinance typically done to lower the monthly payments or overall interest costs.

2: Cash-out refinance when a borrower refinances their current loan and takes out additional cash from the equity in the property. This refinance typically done to access cash for business operations or other investments.

Eligibility for refinance:

To be eligible for commercial real estate refinance, the property must be income-producing, such as an office building, retail center, or multi-family housing complex. The borrower must also have a good credit history and sufficient income to support the loan. Additionally, the property must have enough equity to support the new loan.

The process of refinance:

The process of commercial real estate refinance typically includes the following steps:

Pre-qualification:

The borrower contacts a lender and provides information about their credit history, income, and property. The lender pre-qualifies the borrower and provides an estimate of the loan amount and terms.

Application:

The borrower submits a loan application and provides additional information such as financial statements, rent rolls, and property appraisals.

Underwriting:

The lender reviews the loan application and evaluates the borrower’s creditworthiness and the property’s value.

Approval:

The lender will provide a commitment letter outlining the loan terms if the loan is approved.

Closing:

The borrower signs the loan documents and pays any closing costs. The loan funds are disbursed, and the property is transferred to the new lender.