refinancing commercial real estate happens often for the same reason a person can refinance their home - to reduce the high interest rates. The owner may also be looking to refinance to get cash from equity that is built into the property over time. Whatever the reason there are several points to remember if you are thinking of refinancing your commercial property.
1.Any capital obtained from the refinancing of assets should be reinvested in the property itself. Any other use of money and interest payments on the new part will not be tax deductible. This cash-out amount will be considered a consumer debt, if its use was found to be outside the property and therefore no longer tax deductible.
2.Because loans for commercial properties are typically much larger than those for residential property, it will pay to take into account the type of loan you have in depth before committing to a loan that will take many years to repay. Compare options for a fixed rate and variable rate loans. Does a variable rate loans have caps? How many times is expected to change? These details can often be inferred from the investment index, which is associated with a fixed rate. Be wary of any lender who does not want to discuss these details with you.
3.If you decide to refinance, make sure the new loan is the "due on sale" clause. This clause operates in favor of the lender in that it prevents property from being sold without the approval of the lender.
4.Make sure you know what kind of paperwork will be involved. Professionally prepared this report revenue may be all you need for many types of commercial properties, depending on the circumstances. Corporate tax returns, profit and loss statement and balance sheet may not be necessary. In rare situations, a full assessment or environmental report may be potrebna.Složeniji situation about refinancing, the more complex the required documentation can be.
5.Hefty penalties that must be paid to prepay the existing fixed-rate loans may prohibit some borrowers from refinancing. Check out the details of your original loan to see if there are any pre-payment penalties.
6.Interest rates on commercial real estate loans have reached as low as 5 percent for 10-years. Make sure you get the best rate you can if you decide to refinance. It May be best to lock in long-term debt is now -. Interest Rates May or May not get any lower
7.Consider sold if the option for you. Prime commercial real estate is a hot investment in many areas today. Test the market and see what offers come back.
8.If your business to refinance the building occupies, the acquisition term loan May be an option. Term loans generally mature between one and ten years and can give small businesses the cash they need.