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.
Long before I became involved in Commercial Financing and Real Estate Development, I would hear terms mentioned in regards to Residential and Commercial Loans and Mortgage Refinance options, ARMS, Balloons etc. I was just getting started in this industry and had absolutely no experience in any real estate or even how to obtain a mortgage loan, so these terms were like a foreign language. I realized very quickly that without thorough knowledge of the terminology it is hard to understand what direction you will go.
The initial thought process you had used before will be slightly different from the one used to prepare for a Mortgage Refinance. You had to think about the time it will take to secure a loan this size. It is possible for the amount of time specified on the contract to purchase could expire 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. Although, some of these items are the same, it can become very complicated on a loan this size for a commercial property as you get further along. You also, at some point, 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.
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.
Before we move onto Mortgage Refinance terms let's recap what terms you had to learn before, such as 1031 Tax Exchange, Environmental Reports, what type of commercial property qualifies for what type of loan, which is a lot for one to learn, the difference between Conduit and Mezzanine Loans, and so on. Most importantly, you had to find a great Broker that offers a variety of innovative loan programs for your specific need. So now, it is time to look at Mortgage Refinance.
The terminology is somewhat different when it comes to Mortgage Refinance. You 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.
It is very important to look at how closing costs will affect the equity you have been building over the years. Two of the biggest reasons people look at Mortgage Refinance, are 1. To get a lower interest rate than they currently have, this means lower monthly mortgage payment (less payment more, more cash in your pocket). Second reason people refinance their mortgage is to "cash out" some of the equity they built in time and invest it in a new project.
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.
Long before I became involved in Commercial Financing and Real Estate Development, I would hear terms mentioned in regards to Residential and Commercial Loans and Mortgage Refinance options, ARMS, Balloons etc. I was just getting started in this industry and had absolutely no experience in any real estate or even how to obtain a mortgage loan, so these terms were like a foreign language. I realized very quickly that without thorough knowledge of the terminology it is hard to understand what direction you will go.
The initial thought process you had used before will be slightly different from the one used to prepare for a Mortgage Refinance. You had to think about the time it will take to secure a loan this size. It is possible for the amount of time specified on the contract to purchase could expire 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. Although, some of these items are the same, it can become very complicated on a loan this size for a commercial property as you get further along. You also, at some point, 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.
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.
Before we move onto Mortgage Refinance terms let's recap what terms you had to learn before, such as 1031 Tax Exchange, Environmental Reports, what type of commercial property qualifies for what type of loan, which is a lot for one to learn, the difference between Conduit and Mezzanine Loans, and so on. Most importantly, you had to find a great Broker that offers a variety of innovative loan programs for your specific need. So now, it is time to look at Mortgage Refinance.
The terminology is somewhat different when it comes to Mortgage Refinance. You 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.
It is very important to look at how closing costs will affect the equity you have been building over the years. Two of the biggest reasons people look at Mortgage Refinance, are 1. To get a lower interest rate than they currently have, this means lower monthly mortgage payment (less payment more, more cash in your pocket). Second reason people refinance their mortgage is to "cash out" some of the equity they built in time and invest it in a new project.
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.
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