Jeff Rauth (248 885-8797) Commercial Loan Calculator or Commercial Loan Rates OR Commercial real estate loans
Article Source: http://www.articlesbase.com/real-estate-articles/commercial-loan-refinance-388739.html
When is the best time to refinance a commercial loan? Factors such as prepayment penalties, goals of the borrower, market rates, and existing loan terms come in play. Of course there’s no exact formula, but below are some thoughts on how you might analyze your commercial loan refinance.
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Commercial Loan Refinance
The Discounted Cash Flow method is the
traditional system used, which
essentially compares the existing loan
vs. the proposed loan on a Net Present
Value basis. However we have found that
most commercial property owners are
really interested in:
1. How the refinance will affect their
monthly cash flow?
2. What the closing costs will be?
3. How much of the closing costs will
have to come out pockets?
4. (If increase in cash flow) How many
months will it take for the savings to
“pay back” the owners closing costs?
5. What the principal pay down
(amortization schedule) will be,
compared to existing loan.
Cash Flow
Most borrowers are obviously interested
in improving their cash flow situation
when refinancing. There’s essentially
only 2 ways to do this – reduction of
interest
rate
and or increasing the length of the
loans amortization schedule. That’s it.
Reducing the interest rates is obvious
however most borrowers are surprised to
learn that by spreading out a loan from
say 20 years to 30 years normally
reduces the borrower’s payment by
approximately 20%.
Borrowers that are facing a ballooning
loan may find out, however that their
situation will not improve. Their
monthly payment may go up as markets
rates change, loan programs change etc.
It is often the case as well that the
borrowers books are not as strong as
there where when they secured their
existing loan and they will not be
offered the same program/rates that they
previously qualified for.
Closing Costs
Borrowers are always very concerned about closing costs, and for good reason. For example with appraisals ranging from $2,000 - $5,000, environmental reports from $1,800, processing at around $1,000, title from $1,000 - $2,000, and the bank 1% fee, it makes a lot of sense for borrowers to be concerned. On a refinance, the borrower can normally roll most of these’s costs into the loan amount. In terms of out of pocket costs, the borrower should be prepared to pay the appraisal, and environmental report fees upfront. In addition, sometimes the funding bank will require the processing fee paid upfront as well.
Pay Back
Assuming there is a reduction in monthly payments, borrowers like to do a cash flow analysis to see how long it will take for the savings to pay back their closing costs. For example, if the new loan monthly payment is $2,000 lower and the total closing costs are $10,000 it will take 5 months for the borrower to “break even”.
Principal Pay Down
Principal pay down is obviously another important component of any commercial loan. However, for most owners, especially those with highly leveraged properties, cash flow is more pressing. High debt payments versus net cash after the expenses have been paid make it difficult for the borrower to look at this in any other way.
Closing Costs
Borrowers are always very concerned about closing costs, and for good reason. For example with appraisals ranging from $2,000 - $5,000, environmental reports from $1,800, processing at around $1,000, title from $1,000 - $2,000, and the bank 1% fee, it makes a lot of sense for borrowers to be concerned. On a refinance, the borrower can normally roll most of these’s costs into the loan amount. In terms of out of pocket costs, the borrower should be prepared to pay the appraisal, and environmental report fees upfront. In addition, sometimes the funding bank will require the processing fee paid upfront as well.
Pay Back
Assuming there is a reduction in monthly payments, borrowers like to do a cash flow analysis to see how long it will take for the savings to pay back their closing costs. For example, if the new loan monthly payment is $2,000 lower and the total closing costs are $10,000 it will take 5 months for the borrower to “break even”.
Principal Pay Down
Principal pay down is obviously another important component of any commercial loan. However, for most owners, especially those with highly leveraged properties, cash flow is more pressing. High debt payments versus net cash after the expenses have been paid make it difficult for the borrower to look at this in any other way.
Author: Aisha Cristal
Commercial loans refinancing is a term that these days is getting extremely popular among the business parties existing in Britain. Business scene of every developing or developed country changes very frequently. Hence, to survive in this cut-throat competition, it becomes very necessary for every single business firm or individual to fall back on commercial loans. These loans give them cushion from all the problems that they face due to lack of proper supply of capital at the right time. However, it is one thing availing commercial loans and entirely different thing to repay it back. At this point of time, the concept of commercial loans refinancing comes handy for the people.
The basic idea of commercial loans refinancing is quite unique, here the borrower can avail the loan on the same basis in two different markets (namely prime and sub prime market), from two different money lending parties. One main reason that why people go for refinancing is that beyond a certain point, they are not able to get the loan over their property. At that time going for refinancing is the ideal option.
The main advantage of going for commercial loans refinancing, is that it provides a chance to the owner of business to arrange the required capital in a very short span of time. Moreover taking another loan, may sometime prove very useful for the borrower. It is because chances are there that a borrower goes for availing loans, he may avail the benefit of reduced rate of interest. Also by availing the loan at that time, he can pay his last outstanding loan and also supply his business with the fresh dose of capital. It also leaves him with ample time to repay the loan back again. This is the very reason why most of the borrowers go for this type of refinancing just when the interest rates goes down.
Going for refinancing also helps the concerned businessmen to represent his firm's financial statements in good light too. This ultimately helps the owner of business to strengthen his position in the market. This would ultimately help him in future to get the good deals for his business.
The best part of this sort of refinancing is that it does not involve any kind of heavy paperwork or documentation. Nor the person needs to waste his precious time, and perform tedious and needless legal formalities. Another main feature of it is that, the person once rejected by any lender, is free to knock the other lending party doors. The only thing that a person going for commercial loans refinancing should keep in mind is that, he should discharge all his past finance liabilities. Doing this will increase the chances of getting a good or reasonable rate of interest.
People can also go for the secured loans, since it is a much secured and safe way of removing all your debt related problems. The rate of interest is also low and also the repayment modes are also quite flexible. These days people are also turning to Internet in order to secure a good secured loans or commercial refinancing deal. They just have to fill up an online form and all their problems relating to finding good deal will vanish in no time. Hence, going for secured loans too will not be a bad option at all for someone who is looking for a nice way to end all his financial troubles.
For more information about loans: Bridging finance, Debt Management , Consolidate all your debt and kick them out of your life with consolidation loans
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