Refinancing Commercial Property for Your Business: Dos and Don'ts

If you bought your commercial property at the height of the market, only to see values plummet with the economic downturn, then you’re probably pleased to see that numbers are finally on the rise again where property is concerned. While this provides you with certain advantages, however, it also heralds drawbacks on the horizon, namely an increase in interest rates. As real estate starts to go up in value, interest rates will follow. So if you’ve been toying with the idea of refinancing commercial property for your business, now is a great time to get the ball rolling. And here are just a few dos and don’ts you’ll want to observe in the process.

1. DO: Crunch numbers. There are a lot of numbers to consider when it comes to refinancing your commercial real estate. You have to consider the duration of your new loan, the interest rates, the cost of refinance, and of course, your new monthly payments. But you also need to look at the bigger picture, such as how much you’ll ultimately save by paying your loan off earlier than planned or paying less interest monthly over the same amount of time, for example. It’s important to understand all of the potential costs and savings, both up front and long-term, in order to make an informed decision.
2. DON’T: Waste time. If you’ve decided to refinance, dragging your feet could end up being a mistake for a couple of reasons. First and foremost, rates change daily. And while your financing agent will likely lock in a rate for you at the beginning of the process, it will expire within a set amount of time (say, 30 days). At that point you will have to start over with a new and potentially higher rate of interest. With the economy beginning to recover, and the real estate market in particular, now is a great time to refinance before rates shoot up in response to the growing demand for property.
3. DO: Shop around. Whether you’re trying to find an agent you trust to handle your refinancing or you’re looking to get the best interest rates on a new mortgage loan, it’s important to do some comparison shopping rather than accepting the first offer than comes along.
4. DON’T: Be afraid to haggle. When it comes to refinancing you’ll find that many costs are negotiable, but only if you ask. For example, you can always get your interest rates lower by buying down points, and you need to consider what this will do for you in terms of immediate costs and eventual payoff. But you should also go over your agreement line by line and find out what every fee is for. Some can be negotiated or waived altogether if you think they’re unreasonable.
5. DO: Consider alternative options. Depending on your property, your location, your loan, the economy, and any number of other factors, it may turn out that refinancing your commercial property simply doesn’t make sense financially. However, there are other options you may want to consider, such as selling and relocating, leasing, and so on. A real estate advisory firm like Breakwater or Keyser can offer you the options you need and help you to make a decision that works for your business.