Below I have mentioned some terms you may want to become familiar with to help increase your knowledge and help you become prepared as you approach a When thinking of a Mortgage Refinance for a commercial property, you may want to consider becoming familiar with the terminology to help understand how the process will play out. This will increase your knowledge and help you prepare yourself for what to expect.

Without some familiarity pertaining to a Mortgage Refinance it could be difficult to understand where to start. Without some experience in financing, whether it’s on an initial loan or a Residential Loan, these terms may seem like foreign language or somewhat silly for such a serious matter. A few examples would be: Arm, Balloon, Bridge Loans, Mezzanine Loans, Conduit or CMBS Loans etc.

If you think back to when you applied for your original Commercial Mortgage Finance, you will remember specific terminology slightly different than that of Mortgage Refinance. You had to think about the price of the commercial property, the time it will take to secure a loan this size, it is possible for the amount of time specified on the contract to run out before you get funded, protection from default on such a large loan, not to mention collateral, down payment, closing costs and so on, not too unlike a mortgage on a house. Things can become very complicated on a loan for a commercial property.

You had to make sure you can handle such an obligation by speaking to your Financial Advisor and your Accountant about how long your finances could carry the loan if things don’t go as planned.

The most prominent reasons people look at Mortgage Refinance are because of taxes, facing a ballooning loan or to help reduce monthly payments and interest. And it may also reduce the life of the loan. It is very important to look at how closing costs will affect the equity you have been building over the years. Your situation is a little different and you will need to approach the Mortgage Refinance accordingly. You will now start looking at possible Prepayment Penalties, Cash Out Proceeds, and maybe you want to Inject the money you cash out into another property or update your current property, what is the Discounted Cash Flow, Current vs. Proposed Loan to Value Ratio. Do a simple break even analysis to compare costs of other lenders versus your existing bank. If they know you are looking for a Mortgage Refinance, your current bank may offer to reset the loan. The cost to complete a Mortgage Refinance for a commercial property can turn out to be quite high if you were under the impression it would be

less than an original loan. An appraisal can run between $2,000 – $5,000, Title between $800 – $2,000, Phase One Environmental Report around $2,000 and lender processing fees around $1,000.

Two of the main reasons people look at Mortgage Refinance, is to help reduce monthly payments and interest, in my opinion one of the most important items to look at is how closing costs will affect the equity you have built over the years.

When looking for a Broker don’t hesitate to ask how long they have been in business and their approval vs. denial ratio. Successful Brokerage firms will want to share this information with you. Remember, knowledge is power, stay informed by reading and researching your topic.