Refinancing a commercial mortgages means paying off your current business loan with a new one that has better terms. Businesses usually refinance to free up cash (by freeing up the property’s equity), get a lower interest rate, or reduce their monthly payments.
For example, if your property is worth $1 million and you owe $400,000, you could refinance for $800,000. The new loan pays off your old balance, and you get the extra $400,000 in cash for business needs.
For small and medium-sized businesses, if you can showcase an improved credit score or a detailed balance sheet with clarity, lenders may loan you more capital.
It’s a smart move for expansion, renovations, or debt consolidation, but it’s important to keep a check on timing and costs.
So, when should you refinance? And how do you do it properly? Let’s break it down.
Refinancing isn’t always the best choice. But here are some situations when it makes sense:
If current mortgage rates are lower than when you first got your loan, refinancing could cut your monthly payments and save you thousands over time.
A stronger financial position can help you qualify for better loan terms. If you got a high-interest loan because of weak credit before, you might now secure a lower rate.
A shorter loan term can help you pay off debt faster, while a longer term can reduce monthly payments.
If your business needs more financial flexibility, adjusting the loan term through refinancing can be a good solution.
If your property’s value has increased, refinancing lets you pull out cash for business needs.
This is a great way to finance business growth, especially when other funding options—like business loans—are harder to secure.
For example— A manufacturing company that needs new machinery but struggles to get a business loan could refinance its mortgage, using property equity to fund the purchase at a lower interest rate.
If you have multiple loans, consolidating them into one mortgage can make repayments easier and reduce overall interest costs.
However, this option is only available if your property has equity—meaning its market value is higher than what you currently owe. Remember, equity allows you to refinance for a higher loan amount and use the extra funds to pay off other debts.
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Refinancing requires planning and careful consideration. Here’s how to do it step by step:
Review your business finances before applying. Check your credit score, income stability, and property value. Lenders will evaluate these factors.
Different lenders offer different rates and terms. Consider banks, credit unions, and private lenders. Look for the best balance between interest rates, fees, and flexibility.
Refinancing isn’t free. Consider these costs:
Make sure refinancing saves you more than it costs.
Lenders will ask for financial statements, property details, tax records, and business plans. Having these sheets ready speeds up the process smoothly.
Once approved, the new loan pays off the old one. Ensure you understand the new terms and continue managing your mortgage wisely.
Refinancing commercial mortgages is not always smooth sailing. It is as challenging as securing a first mortgage. From early payment fees and lender charges to prepayment penalties, you need to weigh out every pro and con.
As mortgage refinancing offers an equal positive influence on your business with uncertain risk factors, it requires a similar amount of document verification and wait time for approval.
If you’re looking to lower your payments, find better rates, access cash, or find mortgage lenders in Mississauga, our investment property mortgage specialists can help.
Would refinancing help your business? If so, now might be the right time to explore your options.
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