Should you refinance your commercial mortgage?

Over the years, I've often wondered why there aren't refinance "booms" on commercial real estate the way there are on the residential side.

When you think about it, commercial mortgages are typically much larger, more complex, and have MORE reasons to consider refinancing. It is often said a home purchase is “one of the largest investments” a person will make. That certainly has merit, but to a business owner who has purchased the building to run their business from, it pales in comparison.

There are so many more variables involved in commercial versus home mortgages, they definitely warrant a periodic review regardless of the interest rate environment. With interest rates about as low as they could possibly be, now is a very compelling time for a business owner to review their commercial mortgage rate/term and structure.

Commercial Mortgages cover a variety of structures.

Most business owners are not professional real estate investors, so they probably have the same commercial mortgage they started with, and over time, it is difficult to remember all of the details. Here are some critical aspects to review:

• Are you on a fixed or variable rate?
• If it’s a fixed rate, how long is it fixed for?
• If it’s a variable rate, how often does it change, and what is it tied to?
• How long is the amortization of the mortgage?
• Do you have a pre-payment penalty? If so, how much is it, and for how long?
• Will the mortgage balloon at some point? If so, when?

Now is a great time to see if you can improve your position. In some cases, you can improve your rate tremendously. You may also be in a position to pull some cash out if necessary.

If you have a great relationship with your banker, and I hope that you do, they will be glad to review this with you. If you do NOT have a great relationship with your banker, please feel free to give the ole “Hoosier Banker,” or someone on my team, a call for assistance. The worst case scenario is you learn exactly what you have, and confirm you’re in the best structure for your business. That’s not a bad down side these crazy days!

Our Chief Lending Officer, John P. DeLucia ("Johnny D") will be providing commercial lending information, tips, and insights from time-to-time. If you have questions for John, simply schedule a conversation.

The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent the views of Citizens State Bank and its affiliates, and Citizens State Bank is not responsible for and does not verify the accuracy of any information contained in this article or items hyperlinked within. This is for informational purposes and is no way intended to provide legal advice.