When it comes time to refinance your commercial mortgage, are you asking questions or simply going through the motions? If you don’t take the time to learn about your options, you might miss out on a lower interest rate, more favorable terms, or simply a more enjoyable lending experience.
Here are a few quick questions you can have in your back pocket when talking to a lender about your refinance request.
- What types of loan do I qualify for?
This question might sound like a no-brainer, but it does need to be asked – especially if a loan officer initially presents only one loan program for your request.
Why? Because lenders typically offer a number of loan programs designed around borrower needs. If you’re working with the same lender you partnered with on your original loan, you could be given a solution that no longer aligns with your current financial objectives.
For example, let’s say you took out a short-term loan to help finance improvements for your small office property. Now that the building is fully renovated, you may want to replace that transitional loan with a more permanent solution. But if you don’t state your new request clearly and ask for all available options, a lender could simply offer to refinance with another short-term loan.
- What is your maximum Loan-to-Value (LTV) percentage?
There is no single LTV percentage that all lenders use as a maximum number. Asking a lender this simple question will give you an idea of how much you will be able to borrow.
Knowing a lender’s LTV limit can also help you think strategically about the down payment you wish to make and the monthly interest rate you feel comfortable paying. As you plan, just remember that a lower LTV should net you a lower interest rate. If you’re looking to minimize your payments, you may wish to take out a smaller loan.
- When will you pull my credit report?
Multiple credit checks can impact your overall score over time, so you could be in danger when shopping your loan request to multiple lending alternatives. The good news is that the potential damage can be minimized if these credit checks occur during roughly the same time period. Therefore, to the extent possible, try to group your lender inquiries together.
- Am I able to tap into my property’s equity?
If you’re looking into securing a new loan, it may make sense to consider a cash-out refinance.
This type of refinance allows you to access the equity you’ve built into your commercial property over time. You can then use the cash to make business improvements or, if you’re an investor, purchase another asset.
The problem is that many traditional lenders either don’t offer cash-out refinances or they significantly limit the amount of cash you can obtain and the ways in which you can use it.
If you’re interested in executing a cash-out refinance, it may make more sense to work with a partner like Commercial Direct. Our programs don’t feature the types of limitations that often stifle investors and business owners.
- What are your fees?
If you only focus on the monthly interest rate payment, you could misjudge the impact a refinance will have on your bank account.
Additional costs often include lender fees, such as an origination fee, and 3rd party fees having to do with the property appraisal, taxes, title, and more.
Knowing these fees will help you make a better-informed decision when it comes to choosing the best loan solution for your needs.
- How long will the transaction process take?
This question can be incredibly important if you’re approaching your initial loan’s maturity date. That’s because many commercial loans include a massive balloon note payment at the end of the term.
Therefore, it is certainly in your best interest to choose a lending solution that fits your time frame.
Remember: commercial loans – even those under $1 million – generally take much longer than residential loans to close.
While banks can take months to fund a commercial loan request, alternative lenders are often able to work much faster. For instance, the team at Commercial Direct regularly completes commercial transactions in 45 days or less. Hard money alternatives are typically able to work even faster, though hard money loans also carry a significantly higher interest rate.
If “time to close” is a major priority for you, it may make sense to choose one of the alternative options available to you and accept the higher monthly payment.
Are you ready to ask a Commercial Direct loan expert these types of questions? Simply enter some basic loan request information here and we will reach out to you with next steps that can get you closer to securing a more attractive commercial loan.
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.