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Arizona Commercial Refinance Loans

Commercial Refinance Loans in AZ

Refinancing a Commercial Business Mortgage

There are a plethora of reasons why real estate owners would want to refinance their property. The reasons could be to extend mortgage terms if the owners have a bridge loan that requires hard cash, payoff or to use the property for renewal later. Owners could also be having properties with a higher value than their mortgage and would want to tap into the property’s equity to grow and develop their businesses. Besides, real estate owners could be looking to reduce the financial burden that is facing their business due to the mortgage. With all these reasons, refinancing is popular among many real-estate owners, and they, therefore, require the best commercial mortgage refinancing option for their ideal situations. Arizona mortgage pros offer more information about commercial refinance loans as seen below.

Definition of commercial mortgage

A commercial mortgage is a business loan that uses the business’s property as collateral. Some of the ideal options include office buildings, retail stores, apartment buildings, warehouses, and industrial buildings, among others. The credit and lending industry includes the various mortgage offers, giving out different mortgage loans that can be short and long-term.

How it works

The first thing that a lender will do is to evaluate the credit score of the commercial mortgage applicant. After that, the lender will then assess the value of the property and find out if it qualifies as collateral. Another thing the lender will look at is the revenue and cash flows of the business itself. The loan’s underwriting process will depend from lender to lender who will determine the amount of credit to give. The loan’s period also ranges from lender to lender, but most have a term of between 10-25 years. 

Why business refinance the commercial mortgage

With the long-term extended mortgage terms, the monthly payments will be minimal, and this will put less stress on the commercial enterprise. This is important to businesses, especially those with low cash flows. Likewise, with the lower rates, commercial companies will save more money when they take advantage of the rates reduced on their mortgage. Companies will also benefit from refinancing the current mortgage with another one with a lower rate. However, when making this move, look at the costs linked to the mortgage refinance process and confirm it is worth the transition. 

Cash-out refinance is another benefit. Businesses acquire cash-out refinance loans, and the owners can be able to tap into the equity of the property if the commercial value does not surpass the current balance of the mortgage. This can help the business expand and cover other costs, such as tenant improvement.

Refinancing the commercial mortgage also helps in avoiding the balloon. Mortgages are typically designed in such a way that you pay small amounts monthly during the entire lifetime of the loan. You will then repay the balance when the loan is due. This design, however, can put financial stress on a business. To avoid failing to repay these monthly payments, borrowers can refinance their mortgage before the due date of the balloon payment.

Types of commercial mortgages

Interest-only mortgages

In this type, the borrower will pay the interest of the loan for a predetermined period while the principle remains the same. The borrower will have to repay the principal amount in full when the mortgage loan ends. The small payments being made during the predetermined period can benefit some real estate owners. However, the fees interest only and do not cover the principal amount, which can be a daunting financial task to many businesses. 

Balloon payment mortgages

To repay this mortgage type is not an easy task, and business owners will have a high amount to repay when the term of the loan ends. Lenders will give fixed-rate or adjustable rates depending on this loan type. The main benefit of this type of loan is that it helps in deferring some of the costs to a lower date. This helps easy the debt service of the owner. However, there is a higher payment left behind when the term of the loan ends. 

Fixed-rate commercial mortgage

In this type, the business property will secure the loan, which comes with a fixed rate of interest. This means the monthly payments are similar throughout the loan’s term. This is ideal for many businesses since they can be in a position to plan the repayments before the term ends.

 Adjustable-rate mortgages (ARM)

In this type, the interest rate of the mortgage changes based on a particular index. The benefit of this loan is that the rates of mortgages go down when the general interests go down. However, the opposite is exact; increased interest rates imply increased mortgage payments. 


Options for commercial mortgage refinancing

Bank commercial mortgages

Banks typically give mortgages with higher rates and extended terms which can be as long as 25 years. This is an excellent benefit for commercial real estate owners who want to refinance at a better facility or to look to reduce the monthly mortgage payments. 

SBA mortgage refinancing

This refinancing type is given through an enhancement program from the Small Business Administration. This is one of the most conventional lenders that most borrowers go for. The loan secures the property, and lenders have reduced risks since the SBA enhancement plan will assist in covering a large percentage of the loan if the borrower fails to repay.

Private mortgages

These loans are given by private individuals and investment groups. The lenders in this type are not bound to the many restrictions that are faced by other traditional mortgage lenders. For these reasons, private mortgage lenders can offer both aggressive and innovative options. Some of the loans given include cash-out refinancing, bridge loans, term loans, and more. 

There are many commercial real estate mortgage loan lenders and hence a plethora of options for investors who want to refinance their mortgages. The many lenders, however, come with many loan structures, terms, rates and make it tricky to get the best creditor. Are you faced with the same dilemma? Contact our Arizona refinance commercial loans.