Dinn, Hochman & Potter, LLC

How to refinance a commercial real estate loan, part 2

Within the lifetime of your company, you may need to refinance a mortgage loan. This is a normal part of doing business and is nothing to be intimidated by. However, refinancing also requires careful consideration. While a properly worked out refinancing plan can help keep you in business, accepting unfavorable terms could put you in a terrible financial bind.

One of the first things you should find out is the property's current valuation. This is especially true if it has been a while since you first sought mortgage funding. It is possible that the property's value has experienced a significant change. If this is the case, your current loan-to-value calculation may leave you in need for more equity to qualify for refinancing.

You will also need to examine the possible effects that your current credit could have on a potential loan. It will be much more difficult to get good terms if your credit is suspect. You may still be able to refinance, but you will likely have to accept a higher interest rate and maybe even a balloon payment. The problem with accepting such terms is that you will likely have to refinance yet again in the not-too-distant future.

There are also many fees that are associated with refinancing a loan for such things as title insurance, environmental reports, lender processing and appraisals. So just applying to refinance will cost you money.

If you are in a quandary about what to do regarding refinancing, you may want to get in touch with a knowledgeable business law attorney who can offer you advice and guidance on your options and their possible outcomes. The attorney can also help you craft a thorough business plan that can be presented to potential lenders. Having a good business plan could help convince a lender to give you favorable terms on your loan.

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