Commercial Mortgage Refinance
You may have many reasons for refinancing a commercial mortgage, from avoiding an upcoming balloon payment to lowering your long-term interest rate. But troubles in the commercial real estate sector mean the landscape has changed for businesses that want to work with lenders. It’s well worth knowing what your options are to improve your cash flow. So let’s look at how to go about securing a refinance.
Consider carefully why you want to refinance. If you need money in hand for repairs or improvements, you may be seeking a cash-out product. If your current loan product has an adjustable rate, which makes month-to-month cash flow projections much more difficult, you will probably want to investigate a fixed-rate loan. If you have a balloon payment coming due, you will want to refinance into a new loan to avoid that liability. Knowing what your long-term business goal is will guide you as you choose a loan product and even decide whether refinancing is cost effective or possible.
What documents are required for a commercial mortgage refinance? The document requirements to refinance your commercial loan depend on the property type and usage (owner-operator or investor). Below is the standard documents Park West Capital requires to review your commercial mortgage loan request and determine program eligibility, pricing and terms.
Documents Required to Refinance Your Commercial Loan
- Most recent two years and year to date income and expense statements (P&L) for the subject property. Drop any capital or non-recurring expenses below the line, or provide a separate capital expense summary. This is important as most lenders don’t include cap-ex or non-recurring expenses in their NOI underwriting analysis.
- 12 month trailing P&L. A trailing P&L is a Profit and Loss statement broken out on a monthly basis over the past 12 months.
- Current detailed rent roll.
- Capital improvement summary of recent capital improvements, replacements, upgrades, etc.
- Interior and exterior photos, old appraisal or website.
- Personal financial statement for all key principals.
- Schedule of real estate owned for all key principals.
- Management company bio/resume if property is third party managed.
- Projected cash flow for the project you want to refinance. Many mortgage lenders will refinance commercial mortgage but require a well-thought-out business plan if cashing out.
Be aware of the current valuation of the property you want to refinance. Especially in the current climate of commercial mortgage refinance, the property’s value may have changed significantly since the original mortgage funding. This will change your loan-to-value calculation, or LTV, and may even mean you have to come up with additional equity in order to qualify for a refinanced loan.
Use a debt service calculator tool to make realistic projections of whether your monthly income on the property will cover the commercial mortgage payments for any particular loan product.
Consider how your credit may affect the transaction and talk this over with your prospective Florida mortgage refinance lender. Bad credit will restrict your options, and can often mean a higher interest rate, but it is still possible to obtain refinancing with less-than-perfect credit. Another vehicle that lenders often use with clients with bad credit is a balloon payment mortgage. These can prove worth considering, but you should exercise extreme caution, as you are probably committing yourself to another refinance in the near term, with all the associated costs.
Upfront costs of any multifamily refinance or loan you are considering may include appraisal fees, title insurance, environmental reports and lender processing fees. You should learn how much of these costs you can roll into the loan amount, and how much you will have to pay out-of-pocket.
Please call us at 1800 969 4901 to go through your situation with an expert.