3 Strategic Reasons to Refinance a Commercial Mortgage

By: Zack North

Why refinance a commercial mortgage loan? It’s a good question, and one investors and business owners need to ask themselves often. That’s because unlike home loans, the typical commercial loan is between 5-7 years in length.

If your current loan contains a balloon note, you’ll need to plan your refinance before the final payment is due to avoid having to pay off the full remaining balance of the loan. This payment is typically more than twice as large as the previous month’s payment!

But borrowers often see value in refinancing before they get to the end of their loan’s term.

Here are some of the most common reasons why investors and business owners refinance commercial mortgage loans.

  1. Lock in a better interest rate

Were you unable to get the ideal financing solution when you first secured your commercial loan?  Maybe your credit score wasn’t high enough to qualify for the bank’s best rates.  Or it could be that your property needed improvements that you just couldn’t afford to make at the time.

For example, if you were able to improve your credit score or increase the NOI (Net Operating Income) of your property during your original loan’s term, you could qualify for a much better solution.

Of course, depending on the current state of the market, you could be able to secure a lower-rate loan regardless of the specific actions you’ve taken. If you find yourself in a low-rate environment or if you expect volatility in the future, refinancing and locking in a preferable rate may be a smart strategy.

  1. Improve cash-flow

When you work to pay off your commercial mortgage, you build equity in your property. With the help of a cash-out refinance, you can get access to the cash needed to make property improvements or invest in a new commercial property.

While cash-out refinances are very common in the commercial real estate industry, investors may need to look outside the traditional banking spectrum to find a solution that meets their needs.

That’s because banks typically either significantly limit the amount of cash a borrower can take out of their mortgage, or they choose not to offer a cash-out program at all.

Commercial Direct, a division of Silver Hill Funding, LLC, does offer cash-out refinance loans, and we do not have the cash limit restrictions of many traditional banks.  You can learn more by visiting our refinance page.

But a basic rate/term refinance can also increase your cash-flow.  The money you save on monthly payments can be inserted back into your business or used for any other purpose.

  1. Consolidate debt

If you have accumulated debt, either through credit cards, cash advances, or other means, conducting a cash-out refinance can be an effective way to consolidate that debt and reduce the number of separate payments you must make each month.

This consolidation is valuable for business owners who struggle to manage a growing number of business loans and cash advances.

Consolidating debt through a refinance also helps business owners because the process can free up cash flow in the near term.


Is it time to refinance your commercial loan?  The decision will ultimately come down to your current situation and long-term financial goals.  But with these strategies in mind, you can feel better about the decision-making process.

Want to take the next step with Commercial Direct? Visit our Refinance page to learn more about the loan options available to you now.

Author: Zack North

Zack North is the Director of Marketing for Commercial Direct.  As a regular contributor to a number of top industry publications, Zack enjoys writing about topics that help investors and business owners approach commercial mortgage financing with confidence.

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